Correlation Between IShares Core and IShares Edge
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares Edge 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 Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core Cash and iShares Edge MSCI, you can compare the effects of market volatilities on IShares Core and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares Edge.
Diversification Opportunities for IShares Core and IShares Edge
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 Core Cash and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 Cash are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of IShares Core i.e., IShares Core and IShares Edge go up and down completely randomly.
Pair Corralation between IShares Core and IShares Edge
Assuming the 90 days trading horizon IShares Core is expected to generate 7.84 times less return on investment than IShares Edge. But when comparing it to its historical volatility, iShares Core Cash is 25.52 times less risky than IShares Edge. It trades about 0.57 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.18 of returns per unit of risk over similar time horizon. 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 Core Cash vs. iShares Edge MSCI
Performance |
| Timeline |
| iShares Core Cash |
| iShares Edge MSCI |
IShares Core and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares Edge
The main advantage of trading using opposite IShares Core and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| IShares Core vs. Betashares Asia Technology | IShares Core vs. CD Private Equity | IShares Core vs. BetaShares Australia 200 | IShares Core vs. Australian High Interest |
| IShares Edge vs. SPDR SP 500 | IShares Edge vs. Vanguard Total Market | IShares Edge vs. iShares Core SP | IShares Edge vs. iShares Core SP |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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