Correlation Between IShares Core and Texas Capital

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

By analyzing existing cross correlation between iShares Core SP and Texas Capital Funds, you can compare the effects of market volatilities on IShares Core and Texas Capital 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 Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Texas Capital.

Diversification Opportunities for IShares Core and Texas Capital

0.98

Correlation Coefficient

IShares Core  Texas Capital

Almost no diversification

The 3 months correlation between IShares and Texas is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Texas Capital Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Funds 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 SP are associated (or correlated) with Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Funds has no effect on the direction of IShares Core i.e., IShares Core and Texas Capital go up and down completely randomly.

Pair Corralation between IShares Core and Texas Capital

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the Texas Capital. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SP is 1.09 times less risky than Texas Capital. The etf trades about -0.06 of its potential returns per unit of risk. The Texas Capital Funds is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,257  in Texas Capital Funds on December 28, 2024 and sell it today you would lose (99.00) from holding Texas Capital Funds or give up 3.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

iShares Core SP  vs.  Texas Capital Funds

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking indicators, IShares Core is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Texas Capital Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Capital Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Texas Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Core and Texas Capital

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

The idea behind iShares Core SP and Texas Capital Funds 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.