Correlation Between IShares Core and Vesper Large

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

Diversification Opportunities for IShares Core and Vesper Large

0.77

Correlation Coefficient

IShares Core  Vesper Large

Poor diversification

The 3 months correlation between IShares and Vesper is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Vesper Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vesper Large Cap 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 Vesper Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vesper Large Cap has no effect on the direction of IShares Core i.e., IShares Core and Vesper Large go up and down completely randomly.

Pair Corralation between IShares Core and Vesper Large

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the Vesper Large. In addition to that, IShares Core is 1.06 times more volatile than Vesper Large Cap. It trades about -0.08 of its total potential returns per unit of risk. Vesper Large Cap is currently generating about -0.05 per unit of volatility. If you would invest  3,023  in Vesper Large Cap on December 30, 2024 and sell it today you would lose (101.00) from holding Vesper Large Cap or give up 3.34% 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.  Vesper Large 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.

Vesper Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vesper Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vesper Large is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Vesper Large

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

The idea behind iShares Core SP and Vesper Large 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.