Correlation Between IShares SP and IShares Micro
Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares Micro 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 SP and IShares Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP Small Cap and iShares Micro Cap ETF, you can compare the effects of market volatilities on IShares SP and IShares Micro 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 SP with a short position of IShares Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares Micro.
Diversification Opportunities for IShares SP and IShares Micro
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and iShares Micro Cap ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Micro Cap and IShares SP 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 SP Small Cap are associated (or correlated) with IShares Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Micro Cap has no effect on the direction of IShares SP i.e., IShares SP and IShares Micro go up and down completely randomly.
Pair Corralation between IShares SP and IShares Micro
Considering the 90-day investment horizon IShares SP is expected to generate 1.19 times less return on investment than IShares Micro. But when comparing it to its historical volatility, iShares SP Small Cap is 1.09 times less risky than IShares Micro. It trades about 0.15 of its potential returns per unit of risk. iShares Micro Cap ETF is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 11,970 in iShares Micro Cap ETF on August 31, 2024 and sell it today you would earn a total of 1,772 from holding iShares Micro Cap ETF or generate 14.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP Small Cap vs. iShares Micro Cap ETF
Performance |
| Timeline |
| iShares SP Small |
| iShares Micro Cap |
IShares SP and IShares Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares Micro
The main advantage of trading using opposite IShares SP and IShares Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares Micro 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 Micro will offset losses from the drop in IShares Micro's long position.| IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP 500 |
| IShares Micro vs. iShares SP Small Cap | IShares Micro vs. iShares SP Small Cap | IShares Micro vs. iShares SP Mid Cap | IShares Micro vs. iShares Russell 1000 |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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