Correlation Between IShares Core and BetaPro SP

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

By analyzing existing cross correlation between iShares Core Conservative and BetaPro SP 500, you can compare the effects of market volatilities on IShares Core and BetaPro SP 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 Core with a short position of BetaPro SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and BetaPro SP.

Diversification Opportunities for IShares Core and BetaPro SP

-0.66

Correlation Coefficient

IShares Core  BetaPro SP

Excellent diversification

The 3 months correlation between IShares and BetaPro is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Conservative and BetaPro SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP 500 and IShares 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 iShares Core Conservative are associated (or correlated) with BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP 500 has no effect on the direction of IShares Core i.e., IShares Core and BetaPro SP go up and down completely randomly.

Pair Corralation between IShares Core and BetaPro SP

Assuming the 90 days trading horizon iShares Core Conservative is expected to under-perform the BetaPro SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Conservative is 19.59 times less risky than BetaPro SP. The etf trades about -0.21 of its potential returns per unit of risk. The BetaPro SP 500 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  743.00  in BetaPro SP 500 on October 12, 2024 and sell it today you would earn a total of  90.00  from holding BetaPro SP 500 or generate 12.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

iShares Core Conservative  vs.  BetaPro SP 500

iShares Core Conservative

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Conservative are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

BetaPro SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BetaPro SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares Core and BetaPro SP

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

The idea behind iShares Core Conservative and BetaPro SP 500 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.