Correlation Between IShares Core and ABHY

Can any of the company-specific risk be diversified away by investing in both IShares Core and ABHY 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 ABHY 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 ABHY, you can compare the effects of market volatilities on IShares Core and ABHY 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 ABHY. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and ABHY.

Diversification Opportunities for IShares Core and ABHY

0.2

Correlation Coefficient

IShares Core  ABHY

Modest diversification

The 3 months correlation between IShares and ABHY is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and ABHY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABHY 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 ABHY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABHY has no effect on the direction of IShares Core i.e., IShares Core and ABHY go up and down completely randomly.

Pair Corralation between IShares Core and ABHY

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the ABHY. In addition to that, IShares Core is 4.48 times more volatile than ABHY. It trades about -0.07 of its total potential returns per unit of risk. ABHY is currently generating about 0.06 per unit of volatility. If you would invest  1,899  in ABHY on December 19, 2024 and sell it today you would earn a total of  14.00  from holding ABHY or generate 0.74% return on investment over 90 days.

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

iShares Core SP  vs.  ABHY

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. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ABHY

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ABHY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, ABHY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and ABHY

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

The idea behind iShares Core SP and ABHY 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.