Correlation Between IShares Real and SP Funds

Can any of the company-specific risk be diversified away by investing in both IShares Real and SP Funds 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 Real and SP Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Real Estate and SP Funds SP, you can compare the effects of market volatilities on IShares Real and SP Funds 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 Real with a short position of SP Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Real and SP Funds.

Diversification Opportunities for IShares Real and SP Funds

0.88

Correlation Coefficient

IShares Real  SP Funds

Very poor diversification

The 3 months correlation between IShares and SPRE is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Real Estate and SP Funds SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds SP and IShares Real 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 Real Estate are associated (or correlated) with SP Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds SP has no effect on the direction of IShares Real i.e., IShares Real and SP Funds go up and down completely randomly.

Pair Corralation between IShares Real and SP Funds

Considering the 90-day investment horizon iShares Real Estate is expected to generate 1.01 times more return on investment than SP Funds. However, IShares Real is 1.01 times more volatile than SP Funds SP. It trades about 0.08 of its potential returns per unit of risk. SP Funds SP is currently generating about 0.04 per unit of risk. If you would invest  9,884  in iShares Real Estate on August 30, 2024 and sell it today you would earn a total of  403.00  from holding iShares Real Estate or generate 4.08% return on investment over 90 days.

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

iShares Real Estate  vs.  SP Funds SP

iShares Real Estate

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Real Estate are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Real is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

SP Funds SP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SP Funds SP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SP Funds is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Real and SP Funds

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

The idea behind iShares Real Estate and SP Funds SP 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.