Correlation Between IShares Core and Swan Hedged

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

Diversification Opportunities for IShares Core and Swan Hedged

0.99

Correlation Coefficient

IShares Core  Swan Hedged

No risk reduction

The 3 months correlation between IShares and Swan is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Swan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Hedged Equity 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 Swan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Hedged Equity has no effect on the direction of IShares Core i.e., IShares Core and Swan Hedged go up and down completely randomly.

Pair Corralation between IShares Core and Swan Hedged

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the Swan Hedged. In addition to that, IShares Core is 1.79 times more volatile than Swan Hedged Equity. It trades about -0.03 of its total potential returns per unit of risk. Swan Hedged Equity is currently generating about -0.04 per unit of volatility. If you would invest  2,275  in Swan Hedged Equity on September 23, 2024 and sell it today you would lose (8.00) from holding Swan Hedged Equity or give up 0.35% of portfolio value over 90 days.

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

iShares Core SP  vs.  Swan Hedged Equity

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Swan Hedged Equity

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Hedged Equity are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Swan Hedged is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and Swan Hedged

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

The idea behind iShares Core SP and Swan Hedged Equity 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..