Correlation Between IShares Core and Picton Mahoney

Can any of the company-specific risk be diversified away by investing in both IShares Core and Picton Mahoney 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 Picton Mahoney 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 Picton Mahoney Fortified, you can compare the effects of market volatilities on IShares Core and Picton Mahoney 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 Picton Mahoney. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Picton Mahoney.

Diversification Opportunities for IShares Core and Picton Mahoney

0.69

Correlation Coefficient

IShares Core  Picton Mahoney

Poor diversification

The 3 months correlation between IShares and Picton is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Conservative and Picton Mahoney Fortified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Picton Mahoney Fortified 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 Picton Mahoney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Picton Mahoney Fortified has no effect on the direction of IShares Core i.e., IShares Core and Picton Mahoney go up and down completely randomly.

Pair Corralation between IShares Core and Picton Mahoney

Assuming the 90 days trading horizon iShares Core Conservative is expected to generate 0.84 times more return on investment than Picton Mahoney. However, iShares Core Conservative is 1.19 times less risky than Picton Mahoney. It trades about 0.11 of its potential returns per unit of risk. Picton Mahoney Fortified is currently generating about 0.07 per unit of risk. If you would invest  2,335  in iShares Core Conservative on September 22, 2024 and sell it today you would earn a total of  23.00  from holding iShares Core Conservative or generate 0.99% return on investment over 90 days.

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

iShares Core Conservative  vs.  Picton Mahoney Fortified

iShares Core Conservative

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Conservative are ranked lower than 6 (%) 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.

Picton Mahoney Fortified

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Picton Mahoney Fortified are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Picton Mahoney is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Picton Mahoney

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

The idea behind iShares Core Conservative and Picton Mahoney Fortified 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.