Correlation Between IShares Trust and Main Buywrite

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

By analyzing existing cross correlation between iShares Trust and Main Buywrite ETF, you can compare the effects of market volatilities on IShares Trust and Main Buywrite 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 Main Buywrite. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Main Buywrite.

Diversification Opportunities for IShares Trust and Main Buywrite

0.55

Correlation Coefficient

IShares Trust  Main Buywrite

Very weak diversification

The 3 months correlation between IShares and Main is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Main Buywrite ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Buywrite ETF 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 Main Buywrite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Buywrite ETF has no effect on the direction of IShares Trust i.e., IShares Trust and Main Buywrite go up and down completely randomly.

Pair Corralation between IShares Trust and Main Buywrite

Given the investment horizon of 90 days iShares Trust is expected to generate 0.76 times more return on investment than Main Buywrite. However, iShares Trust is 1.32 times less risky than Main Buywrite. It trades about 0.09 of its potential returns per unit of risk. Main Buywrite ETF is currently generating about 0.06 per unit of risk. If you would invest  2,605  in iShares Trust on November 28, 2024 and sell it today you would earn a total of  32.00  from holding iShares Trust or generate 1.23% return on investment over 90 days.

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

iShares Trust   vs.  Main Buywrite ETF

iShares Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Main Buywrite ETF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Buywrite ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Buywrite is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Trust and Main Buywrite

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

The idea behind iShares Trust and Main Buywrite ETF 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.