Correlation Between IShares SP and IShares Flexible

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

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

Diversification Opportunities for IShares SP and IShares Flexible

-0.28

Correlation Coefficient

IShares SP  IShares Flexible

Very good diversification

The 3 months correlation between IShares and IShares is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and iShares Flexible Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Flexible Monthly and IShares SP 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 SP Mid Cap are associated (or correlated) with IShares Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Flexible Monthly has no effect on the direction of IShares SP i.e., IShares SP and IShares Flexible go up and down completely randomly.

Pair Corralation between IShares SP and IShares Flexible

Assuming the 90 days trading horizon iShares SP Mid Cap is expected to generate 4.92 times more return on investment than IShares Flexible. However, IShares SP is 4.92 times more volatile than iShares Flexible Monthly. It trades about 0.19 of its potential returns per unit of risk. iShares Flexible Monthly is currently generating about 0.01 per unit of risk. If you would invest  2,697  in iShares SP Mid Cap on September 4, 2024 and sell it today you would earn a total of  323.00  from holding iShares SP Mid Cap or generate 11.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.63%
Values	Daily Returns

iShares SP Mid Cap  vs.  iShares Flexible Monthly

iShares SP Mid

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Flexible Monthly

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days iShares Flexible Monthly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Flexible is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares SP and IShares Flexible

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

The idea behind iShares SP Mid Cap and iShares Flexible Monthly 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.