Correlation Between IShares SP and IShares Global

Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares Global 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 SP and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares SP 500 and iShares Global Aggregate, you can compare the effects of market volatilities on IShares SP and IShares Global 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 SP with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares Global.

Diversification Opportunities for IShares SP and IShares Global

-0.63

Correlation Coefficient

IShares SP  IShares Global

Excellent diversification

The 3 months correlation between IShares and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShares Global Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Aggregate and IShares SP 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 SP 500 are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Aggregate has no effect on the direction of IShares SP i.e., IShares SP and IShares Global go up and down completely randomly.

Pair Corralation between IShares SP and IShares Global

Assuming the 90 days trading horizon iShares SP 500 is expected to generate 3.29 times more return on investment than IShares Global. However, IShares SP is 3.29 times more volatile than iShares Global Aggregate. It trades about 0.14 of its potential returns per unit of risk. iShares Global Aggregate is currently generating about 0.03 per unit of risk. If you would invest  5,168  in iShares SP 500 on September 2, 2024 and sell it today you would earn a total of  350.00  from holding iShares SP 500 or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

iShares SP 500  vs.  iShares Global Aggregate

iShares SP 500

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Global Aggregate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Aggregate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares SP and IShares Global

The main advantage of trading using opposite IShares SP and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares Global 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 IShares Global will offset losses from the drop in IShares Global's long position.

The idea behind iShares SP 500 and iShares Global Aggregate 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.