Correlation Between IShares Edge and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares Edge 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 IShares Edge and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Edge MSCI and iShares Core Cash, you can compare the effects of market volatilities on IShares Edge 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 IShares Edge with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and IShares Core.
Diversification Opportunities for IShares Edge and IShares Core
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI 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 IShares Edge 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 Edge MSCI 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 IShares Edge i.e., IShares Edge and IShares Core go up and down completely randomly.
Pair Corralation between IShares Edge and IShares Core
Assuming the 90 days trading horizon iShares Edge MSCI is expected to generate 25.52 times more return on investment than IShares Core. However, IShares Edge is 25.52 times more volatile than iShares Core Cash. It trades about 0.18 of its potential returns per unit of risk. iShares Core Cash is currently generating about 0.57 per unit of risk. If you would invest 3,450 in iShares Edge MSCI on August 29, 2024 and sell it today you would earn a total of 94.00 from holding iShares Edge MSCI or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Edge MSCI vs. iShares Core Cash
Performance |
| Timeline |
| iShares Edge MSCI |
| iShares Core Cash |
IShares Edge and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and IShares Core
The main advantage of trading using opposite IShares Edge and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge 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.| IShares Edge vs. SPDR SP 500 | IShares Edge vs. Vanguard Total Market | IShares Edge vs. iShares Core SP | IShares Edge vs. iShares Core SP |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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