Correlation Between Australian High and IShares Core
Can any of the company-specific risk be diversified away by investing in both Australian High and IShares Core 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 Australian High and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian High Interest and iShares Core Cash, you can compare the effects of market volatilities on Australian High and IShares Core 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 Australian High with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian High and IShares Core.
Diversification Opportunities for Australian High and IShares Core
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Australian and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Australian High Interest and iShares Core Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Cash and Australian High 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 Australian High Interest are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Cash has no effect on the direction of Australian High i.e., Australian High and IShares Core go up and down completely randomly.
Pair Corralation between Australian High and IShares Core
Assuming the 90 days trading horizon Australian High is expected to generate 59.13 times less return on investment than IShares Core. But when comparing it to its historical volatility, Australian High Interest is 1089.84 times less risky than IShares Core. It trades about 0.86 of its potential returns per unit of risk. iShares Core Cash is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9,280 in iShares Core Cash on August 29, 2024 and sell it today you would earn a total of 783.00 from holding iShares Core Cash or generate 8.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.4% |
| Values | Daily Returns |
Australian High Interest vs. iShares Core Cash
Performance |
| Timeline |
| Australian High Interest |
| iShares Core Cash |
Australian High and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian High and IShares Core
The main advantage of trading using opposite Australian High and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian High position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.The idea behind Australian High Interest and iShares Core Cash 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.| IShares Core vs. Betashares Asia Technology | IShares Core vs. CD Private Equity | IShares Core vs. BetaShares Australia 200 | IShares Core vs. Australian High Interest |
Check out your portfolio center.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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