Correlation Between Manager Directed and IShares

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

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

Diversification Opportunities for Manager Directed and IShares

-0.32

Correlation Coefficient

Manager Directed  IShares

Very good diversification

The 3 months correlation between Manager and IShares is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Manager Directed Portfolios and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares and Manager Directed 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 Manager Directed Portfolios are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Manager Directed i.e., Manager Directed and IShares go up and down completely randomly.

Pair Corralation between Manager Directed and IShares

If you would invest  2,714  in Manager Directed Portfolios on October 7, 2024 and sell it today you would earn a total of  11.00  from holding Manager Directed Portfolios or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Manager Directed Portfolios  vs.  IShares

Manager Directed Por

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Manager Directed Portfolios are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Manager Directed is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Manager Directed and IShares

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

The idea behind Manager Directed Portfolios and IShares 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.