Correlation Between Purpose Monthly and IShares Core

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

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

Diversification Opportunities for Purpose Monthly and IShares Core

0.4

Correlation Coefficient

Purpose Monthly  IShares Core

Very weak diversification

The 3 months correlation between Purpose and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Monthly Income and iShares Core Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Growth and Purpose Monthly 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 Purpose Monthly Income are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Growth has no effect on the direction of Purpose Monthly i.e., Purpose Monthly and IShares Core go up and down completely randomly.

Pair Corralation between Purpose Monthly and IShares Core

Assuming the 90 days trading horizon Purpose Monthly Income is expected to generate 0.68 times more return on investment than IShares Core. However, Purpose Monthly Income is 1.48 times less risky than IShares Core. It trades about 0.17 of its potential returns per unit of risk. iShares Core Growth is currently generating about 0.01 per unit of risk. If you would invest  1,730  in Purpose Monthly Income on December 23, 2024 and sell it today you would earn a total of  80.00  from holding Purpose Monthly Income or generate 4.62% return on investment over 90 days.

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

Purpose Monthly Income  vs.  iShares Core Growth

Purpose Monthly Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Monthly Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Purpose Monthly is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Core Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Purpose Monthly and IShares Core

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

The idea behind Purpose Monthly Income and iShares Core Growth 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.