Correlation Between IShares Factors and Strategy Shares

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

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

Diversification Opportunities for IShares Factors and Strategy Shares

0.71

Correlation Coefficient

IShares Factors  Strategy Shares

Poor diversification

The 3 months correlation between IShares and Strategy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Factors Growth and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares and IShares Factors 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 Factors Growth are associated (or correlated) with Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of IShares Factors i.e., IShares Factors and Strategy Shares go up and down completely randomly.

Pair Corralation between IShares Factors and Strategy Shares

Given the investment horizon of 90 days iShares Factors Growth is expected to generate 0.98 times more return on investment than Strategy Shares. However, iShares Factors Growth is 1.02 times less risky than Strategy Shares. It trades about 0.14 of its potential returns per unit of risk. Strategy Shares is currently generating about 0.09 per unit of risk. If you would invest  2,884  in iShares Factors Growth on September 14, 2024 and sell it today you would earn a total of  2,850  from holding iShares Factors Growth or generate 98.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	29.39%
Values	Daily Returns

iShares Factors Growth  vs.  Strategy Shares

iShares Factors Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Factors Growth are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, IShares Factors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Strategy Shares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategy Shares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Strategy Shares 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 Factors and Strategy Shares

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

The idea behind iShares Factors Growth and Strategy Shares 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.