Correlation Between IShares Core and SGI Dynamic

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

Diversification Opportunities for IShares Core and SGI Dynamic

0.67

Correlation Coefficient

IShares Core  SGI Dynamic

Poor diversification

The 3 months correlation between IShares and SGI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and SGI Dynamic Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGI Dynamic Tactical 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 SGI Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGI Dynamic Tactical has no effect on the direction of IShares Core i.e., IShares Core and SGI Dynamic go up and down completely randomly.

Pair Corralation between IShares Core and SGI Dynamic

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the SGI Dynamic. In addition to that, IShares Core is 1.52 times more volatile than SGI Dynamic Tactical. It trades about -0.13 of its total potential returns per unit of risk. SGI Dynamic Tactical is currently generating about -0.05 per unit of volatility. If you would invest  2,857  in SGI Dynamic Tactical on December 4, 2024 and sell it today you would lose (19.00) from holding SGI Dynamic Tactical or give up 0.67% of portfolio value over 90 days.

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

iShares Core SP  vs.  SGI Dynamic Tactical

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.

SGI Dynamic Tactical

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares Core and SGI Dynamic

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

The idea behind iShares Core SP and SGI Dynamic Tactical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.