Correlation Between IShares Core and TSMZ

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

Diversification Opportunities for IShares Core and TSMZ

-0.41

Correlation Coefficient

IShares Core  TSMZ

Very good diversification

The 3 months correlation between IShares and TSMZ is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and TSMZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSMZ 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 TSMZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSMZ has no effect on the direction of IShares Core i.e., IShares Core and TSMZ go up and down completely randomly.

Pair Corralation between IShares Core and TSMZ

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.31 times more return on investment than TSMZ. However, iShares Core SP is 3.2 times less risky than TSMZ. It trades about 0.2 of its potential returns per unit of risk. TSMZ is currently generating about -0.03 per unit of risk. If you would invest  55,311  in iShares Core SP on September 3, 2024 and sell it today you would earn a total of  5,196  from holding iShares Core SP or generate 9.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	65.63%
Values	Daily Returns

iShares Core SP  vs.  TSMZ

iShares Core SP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 15 (%) 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.

TSMZ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSMZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, TSMZ 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 TSMZ

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

The idea behind iShares Core SP and TSMZ 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.