Correlation Between IShares Core and IMGP DBi

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

Diversification Opportunities for IShares Core and IMGP DBi

0.84

Correlation Coefficient

IShares Core  IMGP DBi

Very poor diversification

The 3 months correlation between IShares and IMGP is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iMGP DBi Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iMGP DBi Managed 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 IMGP DBi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iMGP DBi Managed has no effect on the direction of IShares Core i.e., IShares Core and IMGP DBi go up and down completely randomly.

Pair Corralation between IShares Core and IMGP DBi

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the IMGP DBi. In addition to that, IShares Core is 1.68 times more volatile than iMGP DBi Managed. It trades about -0.07 of its total potential returns per unit of risk. iMGP DBi Managed is currently generating about -0.07 per unit of volatility. If you would invest  2,612  in iMGP DBi Managed on December 25, 2024 and sell it today you would lose (67.00) from holding iMGP DBi Managed or give up 2.57% of portfolio value over 90 days.

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

iShares Core SP  vs.  iMGP DBi Managed

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.

iMGP DBi Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days iMGP DBi Managed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, IMGP DBi is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and IMGP DBi

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

The idea behind iShares Core SP and iMGP DBi Managed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.