Correlation Between IShares Core and ETF Series

Can any of the company-specific risk be diversified away by investing in both IShares Core and ETF Series at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Core and ETF Series into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Core MSCI and ETF Series Solutions, you can compare the effects of market volatilities on IShares Core and ETF Series and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Core with a short position of ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and ETF Series.

Diversification Opportunities for IShares Core and ETF Series

0.98

Correlation Coefficient

IShares Core  ETF Series

Almost no diversification

The 3 months correlation between IShares and ETF is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and IShares Core is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Core MSCI are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of IShares Core i.e., IShares Core and ETF Series go up and down completely randomly.

Pair Corralation between IShares Core and ETF Series

Given the investment horizon of 90 days IShares Core is expected to generate 1.3 times less return on investment than ETF Series. In addition to that, IShares Core is 1.03 times more volatile than ETF Series Solutions. It trades about 0.12 of its total potential returns per unit of risk. ETF Series Solutions is currently generating about 0.16 per unit of volatility. If you would invest  2,367  in ETF Series Solutions on November 28, 2024 and sell it today you would earn a total of  160.00  from holding ETF Series Solutions or generate 6.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Core MSCI  vs.  ETF Series Solutions

iShares Core MSCI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ETF Series Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ETF Series may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with IShares Core and ETF Series

The main advantage of trading using opposite IShares Core and ETF Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, ETF Series can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ETF Series will offset losses from the drop in ETF Series' long position.

The idea behind iShares Core MSCI and ETF Series Solutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.