Correlation Between IShares Conservative and IShares High

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

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

Diversification Opportunities for IShares Conservative and IShares High

0.81

Correlation Coefficient

IShares Conservative  IShares High

Very poor diversification

The 3 months correlation between IShares and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Conservative Short and iShares High Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares High Quality and IShares Conservative 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 Conservative Short are associated (or correlated) with IShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares High Quality has no effect on the direction of IShares Conservative i.e., IShares Conservative and IShares High go up and down completely randomly.

Pair Corralation between IShares Conservative and IShares High

Assuming the 90 days trading horizon IShares Conservative is expected to generate 1.29 times less return on investment than IShares High. But when comparing it to its historical volatility, iShares Conservative Short is 2.65 times less risky than IShares High. It trades about 0.11 of its potential returns per unit of risk. iShares High Quality is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,908  in iShares High Quality on September 12, 2024 and sell it today you would earn a total of  24.00  from holding iShares High Quality or generate 1.26% return on investment over 90 days.

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

iShares Conservative Short  vs.  iShares High Quality

iShares Conservative

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Conservative Short are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares High Quality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares High Quality are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares High 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 Conservative and IShares High

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

The idea behind iShares Conservative Short and iShares High Quality 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.