Correlation Between IShares Conservative and IShares Short

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

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

Diversification Opportunities for IShares Conservative and IShares Short

0.87

Correlation Coefficient

IShares Conservative  IShares Short

Very poor diversification

The 3 months correlation between IShares and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Conservative Strategic and iShares Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Term 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 Strategic are associated (or correlated) with IShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Term has no effect on the direction of IShares Conservative i.e., IShares Conservative and IShares Short go up and down completely randomly.

Pair Corralation between IShares Conservative and IShares Short

Assuming the 90 days trading horizon IShares Conservative is expected to generate 4.54 times less return on investment than IShares Short. In addition to that, IShares Conservative is 1.41 times more volatile than iShares Short Term. It trades about 0.01 of its total potential returns per unit of risk. iShares Short Term is currently generating about 0.09 per unit of volatility. If you would invest  1,709  in iShares Short Term on September 13, 2024 and sell it today you would earn a total of  19.00  from holding iShares Short Term or generate 1.11% return on investment over 90 days.

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

iShares Conservative Strategic  vs.  iShares Short Term

iShares Conservative

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Conservative Strategic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and 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 Short Term

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Term are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, IShares Short 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 Short

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

The idea behind iShares Conservative Strategic and iShares Short Term 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.