Correlation Between Vident Core and IShares Trust

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

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

Diversification Opportunities for Vident Core and IShares Trust

0.99

Correlation Coefficient

Vident Core  IShares Trust

No risk reduction

The 3 months correlation between Vident and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vident Core Bond and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Vident Core 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 Vident Core Bond are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Vident Core i.e., Vident Core and IShares Trust go up and down completely randomly.

Pair Corralation between Vident Core and IShares Trust

Given the investment horizon of 90 days Vident Core is expected to generate 1.05 times less return on investment than IShares Trust. In addition to that, Vident Core is 1.3 times more volatile than iShares Trust . It trades about 0.09 of its total potential returns per unit of risk. iShares Trust is currently generating about 0.12 per unit of volatility. If you would invest  4,230  in iShares Trust on December 28, 2024 and sell it today you would earn a total of  78.00  from holding iShares Trust or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Vident Core Bond  vs.  iShares Trust

Vident Core Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vident Core Bond are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vident Core and IShares Trust

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

The idea behind Vident Core Bond and iShares Trust 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.