Correlation Between IShares Core and ETRACS Quarterly

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

Diversification Opportunities for IShares Core and ETRACS Quarterly

0.8

Correlation Coefficient

IShares Core  ETRACS Quarterly

Very poor diversification

The 3 months correlation between IShares and ETRACS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay 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 ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of IShares Core i.e., IShares Core and ETRACS Quarterly go up and down completely randomly.

Pair Corralation between IShares Core and ETRACS Quarterly

Considering the 90-day investment horizon IShares Core is expected to generate 1.4 times less return on investment than ETRACS Quarterly. But when comparing it to its historical volatility, iShares Core SP is 1.57 times less risky than ETRACS Quarterly. It trades about 0.38 of its potential returns per unit of risk. ETRACS Quarterly Pay is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  2,965  in ETRACS Quarterly Pay on September 5, 2024 and sell it today you would earn a total of  251.00  from holding ETRACS Quarterly Pay or generate 8.47% return on investment over 90 days.

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

iShares Core SP  vs.  ETRACS Quarterly Pay

iShares Core SP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ETRACS Quarterly Pay

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, ETRACS Quarterly may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and ETRACS Quarterly

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

The idea behind iShares Core SP and ETRACS Quarterly Pay 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.