Correlation Between IShares Core and Brompton Enhanced

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

By analyzing existing cross correlation between iShares Core Growth and Brompton Enhanced Multi Asset, you can compare the effects of market volatilities on IShares Core and Brompton Enhanced 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 Brompton Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Brompton Enhanced.

Diversification Opportunities for IShares Core and Brompton Enhanced

0.91

Correlation Coefficient

IShares Core  Brompton Enhanced

Almost no diversification

The 3 months correlation between IShares and Brompton is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and Brompton Enhanced Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Enhanced Multi 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 Growth are associated (or correlated) with Brompton Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Enhanced Multi has no effect on the direction of IShares Core i.e., IShares Core and Brompton Enhanced go up and down completely randomly.

Pair Corralation between IShares Core and Brompton Enhanced

Assuming the 90 days trading horizon iShares Core Growth is expected to under-perform the Brompton Enhanced. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Growth is 1.39 times less risky than Brompton Enhanced. The etf trades about -0.13 of its potential returns per unit of risk. The Brompton Enhanced Multi Asset is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,394  in Brompton Enhanced Multi Asset on December 4, 2024 and sell it today you would lose (10.00) from holding Brompton Enhanced Multi Asset or give up 0.72% of portfolio value over 90 days.

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

iShares Core Growth  vs.  Brompton Enhanced Multi Asset

iShares Core Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core Growth has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Brompton Enhanced Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brompton Enhanced Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton Enhanced 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 Brompton Enhanced

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

The idea behind iShares Core Growth and Brompton Enhanced Multi Asset 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.