Correlation Between IShares NASDAQ and Picton Mahoney

Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ 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 NASDAQ 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 NASDAQ 100 and Picton Mahoney Fortified, you can compare the effects of market volatilities on IShares NASDAQ 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 NASDAQ with a short position of Picton Mahoney. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Picton Mahoney.

Diversification Opportunities for IShares NASDAQ and Picton Mahoney

0.89

Correlation Coefficient

IShares NASDAQ  Picton Mahoney

Very poor diversification

The 3 months correlation between IShares and Picton is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 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 NASDAQ 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 NASDAQ 100 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 NASDAQ i.e., IShares NASDAQ and Picton Mahoney go up and down completely randomly.

Pair Corralation between IShares NASDAQ and Picton Mahoney

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.31 times more return on investment than Picton Mahoney. However, IShares NASDAQ is 1.31 times more volatile than Picton Mahoney Fortified. It trades about 0.1 of its potential returns per unit of risk. Picton Mahoney Fortified is currently generating about -0.09 per unit of risk. If you would invest  5,224  in iShares NASDAQ 100 on September 23, 2024 and sell it today you would earn a total of  129.00  from holding iShares NASDAQ 100 or generate 2.47% return on investment over 90 days.

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

iShares NASDAQ 100  vs.  Picton Mahoney Fortified

iShares NASDAQ 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Picton Mahoney Fortified

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Picton Mahoney Fortified are ranked lower than 7 (%) 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 NASDAQ and Picton Mahoney

The main advantage of trading using opposite IShares NASDAQ and Picton Mahoney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ 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 NASDAQ 100 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.