Correlation Between IShares Core and IShares NASDAQ

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

Diversification Opportunities for IShares Core and IShares NASDAQ

0.99

Correlation Coefficient

IShares Core  IShares NASDAQ

No risk reduction

The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 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 NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of IShares Core i.e., IShares Core and IShares NASDAQ go up and down completely randomly.

Pair Corralation between IShares Core and IShares NASDAQ

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.72 times more return on investment than IShares NASDAQ. However, iShares Core SP is 1.39 times less risky than IShares NASDAQ. It trades about -0.09 of its potential returns per unit of risk. iShares NASDAQ 100 is currently generating about -0.1 per unit of risk. If you would invest  6,129  in iShares Core SP on December 30, 2024 and sell it today you would lose (348.00) from holding iShares Core SP or give up 5.68% of portfolio value over 90 days.

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

iShares Core SP  vs.  iShares NASDAQ 100

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 NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares Core and IShares NASDAQ

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

The idea behind iShares Core SP and iShares NASDAQ 100 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.