Correlation Between IShares Core and IShares Premium

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

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

Diversification Opportunities for IShares Core and IShares Premium

-0.57

Correlation Coefficient

IShares Core  IShares Premium

Excellent diversification

The 3 months correlation between IShares and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares Premium Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Premium Money 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 SP are associated (or correlated) with IShares Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Premium Money has no effect on the direction of IShares Core i.e., IShares Core and IShares Premium go up and down completely randomly.

Pair Corralation between IShares Core and IShares Premium

Assuming the 90 days trading horizon iShares Core SP is expected to under-perform the IShares Premium. In addition to that, IShares Core is 62.9 times more volatile than iShares Premium Money. It trades about -0.09 of its total potential returns per unit of risk. iShares Premium Money is currently generating about 0.77 per unit of volatility. If you would invest  4,964  in iShares Premium Money on December 30, 2024 and sell it today you would earn a total of  39.00  from holding iShares Premium Money or generate 0.79% return on investment over 90 days.

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

iShares Core SP  vs.  iShares Premium Money

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP 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.

iShares Premium Money

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Premium Money are ranked lower than 60 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Premium 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 IShares Premium

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

The idea behind iShares Core SP and iShares Premium Money 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.