Correlation Between IShares Core and Aptus Defined

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

By analyzing existing cross correlation between iShares Core 1 5 and Aptus Defined Risk, you can compare the effects of market volatilities on IShares Core and Aptus Defined 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 Aptus Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Aptus Defined.

Diversification Opportunities for IShares Core and Aptus Defined

0.7

Correlation Coefficient

IShares Core  Aptus Defined

Poor diversification

The 3 months correlation between IShares and Aptus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core 1 5 and Aptus Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptus Defined Risk 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 1 5 are associated (or correlated) with Aptus Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptus Defined Risk has no effect on the direction of IShares Core i.e., IShares Core and Aptus Defined go up and down completely randomly.

Pair Corralation between IShares Core and Aptus Defined

Given the investment horizon of 90 days IShares Core is expected to generate 5.6 times less return on investment than Aptus Defined. But when comparing it to its historical volatility, iShares Core 1 5 is 4.18 times less risky than Aptus Defined. It trades about 0.02 of its potential returns per unit of risk. Aptus Defined Risk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,789  in Aptus Defined Risk on September 23, 2024 and sell it today you would earn a total of  15.00  from holding Aptus Defined Risk or generate 0.54% return on investment over 90 days.

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

iShares Core 1 5  vs.  Aptus Defined Risk

iShares Core 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core 1 5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aptus Defined Risk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptus Defined Risk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Aptus Defined is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Core and Aptus Defined

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

The idea behind iShares Core 1 5 and Aptus Defined Risk 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.