Correlation Between IShares Trust and Ameriprise Financial

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

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

Diversification Opportunities for IShares Trust and Ameriprise Financial

0.75

Correlation Coefficient

IShares Trust  Ameriprise Financial

Poor diversification

The 3 months correlation between IShares and Ameriprise is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and IShares Trust 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 Trust are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of IShares Trust i.e., IShares Trust and Ameriprise Financial go up and down completely randomly.

Pair Corralation between IShares Trust and Ameriprise Financial

Assuming the 90 days trading horizon IShares Trust is expected to generate 6.06 times less return on investment than Ameriprise Financial. But when comparing it to its historical volatility, iShares Trust is 5.91 times less risky than Ameriprise Financial. It trades about 0.18 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  928,889  in Ameriprise Financial on September 17, 2024 and sell it today you would earn a total of  171,588  from holding Ameriprise Financial or generate 18.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

iShares Trust   vs.  Ameriprise Financial

iShares Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ameriprise Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and Ameriprise Financial

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

The idea behind iShares Trust and Ameriprise Financial 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.