Correlation Between IShares Select and Freedom Day

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Can any of the company-specific risk be diversified away by investing in both IShares Select and Freedom Day 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 Select and Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Select Dividend and Freedom Day Dividend, you can compare the effects of market volatilities on IShares Select and Freedom Day 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 Select with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Select and Freedom Day.

Diversification Opportunities for IShares Select and Freedom Day

ISharesFreedomDiversified AwayISharesFreedomDiversified Away100%
0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between IShares and Freedom is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and IShares Select 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 Select Dividend are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of IShares Select i.e., IShares Select and Freedom Day go up and down completely randomly.

Pair Corralation between IShares Select and Freedom Day

Considering the 90-day investment horizon iShares Select Dividend is expected to generate 0.91 times more return on investment than Freedom Day. However, iShares Select Dividend is 1.1 times less risky than Freedom Day. It trades about 0.1 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about -0.05 per unit of risk. If you would invest  13,510  in iShares Select Dividend on November 25, 2024 and sell it today you would earn a total of  159.00  from holding iShares Select Dividend or generate 1.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

iShares Select Dividend  vs.  Freedom Day Dividend

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -4-2024
JavaScript chart by amCharts 3.21.15DVY MBOX
       Timeline  
iShares Select Dividend 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days iShares Select Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb128130132134136138140142
Freedom Day Dividend 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32.53333.53434.535

IShares Select and Freedom Day Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.49-1.87-1.24-0.610.010.631.251.882.5 0.10.20.30.40.50.6
JavaScript chart by amCharts 3.21.15DVY MBOX
       Returns  

Pair Trading with IShares Select and Freedom Day

The main advantage of trading using opposite IShares Select and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Select position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.
The idea behind iShares Select Dividend and Freedom Day Dividend 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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