Correlation Between IShares Core and RiverFront Dynamic

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

Diversification Opportunities for IShares Core and RiverFront Dynamic

0.98

Correlation Coefficient

IShares Core  RiverFront Dynamic

Almost no diversification

The 3 months correlation between IShares and RiverFront is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and RiverFront Dynamic Flex Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic Flex 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 RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic Flex has no effect on the direction of IShares Core i.e., IShares Core and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between IShares Core and RiverFront Dynamic

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the RiverFront Dynamic. In addition to that, IShares Core is 1.06 times more volatile than RiverFront Dynamic Flex Cap. It trades about -0.08 of its total potential returns per unit of risk. RiverFront Dynamic Flex Cap is currently generating about -0.07 per unit of volatility. If you would invest  5,800  in RiverFront Dynamic Flex Cap on December 29, 2024 and sell it today you would lose (252.00) from holding RiverFront Dynamic Flex Cap or give up 4.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

iShares Core SP  vs.  RiverFront Dynamic Flex Cap

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.

RiverFront Dynamic Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days RiverFront Dynamic Flex Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and RiverFront Dynamic

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

The idea behind iShares Core SP and RiverFront Dynamic Flex Cap 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.