Correlation Between IShares Corp and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares Corp 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 Corp 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 Corp Bond and iShares Core CHF, you can compare the effects of market volatilities on IShares Corp 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 Corp with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Corp and IShares Core.
Diversification Opportunities for IShares Corp and IShares Core
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Corp Bond and iShares Core CHF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core CHF and IShares Corp 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 Corp Bond 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 CHF has no effect on the direction of IShares Corp i.e., IShares Corp and IShares Core go up and down completely randomly.
Pair Corralation between IShares Corp and IShares Core
Assuming the 90 days trading horizon iShares Corp Bond is expected to generate 2.42 times more return on investment than IShares Core. However, IShares Corp is 2.42 times more volatile than iShares Core CHF. It trades about 0.03 of its potential returns per unit of risk. iShares Core CHF is currently generating about 0.07 per unit of risk. If you would invest 457.00 in iShares Corp Bond on October 11, 2024 and sell it today you would earn a total of 31.00 from holding iShares Corp Bond or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 85.8% |
| Values | Daily Returns |
iShares Corp Bond vs. iShares Core CHF
Performance |
| Timeline |
| iShares Corp Bond |
| iShares Core CHF |
IShares Corp and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Corp and IShares Core
The main advantage of trading using opposite IShares Corp and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Corp 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against IShares Corp as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. IShares Corp's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, IShares Corp's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to iShares Corp Bond.
| IShares Core vs. iShares Corp Bond | IShares Core vs. iShares Emerging Asia | IShares Core vs. iShares MSCI Global | IShares Core vs. iShares VII PLC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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