Correlation Between IShares Core and IShares Smart
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares Smart 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 Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and iShares Smart City, you can compare the effects of market volatilities on IShares Core and IShares Smart 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 Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares Smart.
Diversification Opportunities for IShares Core and IShares Smart
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and iShares Smart City in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Smart City 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 MSCI are associated (or correlated) with IShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Smart City has no effect on the direction of IShares Core i.e., IShares Core and IShares Smart go up and down completely randomly.
Pair Corralation between IShares Core and IShares Smart
Assuming the 90 days trading horizon IShares Core is expected to generate 1.72 times less return on investment than IShares Smart. In addition to that, IShares Core is 1.06 times more volatile than iShares Smart City. It trades about 0.06 of its total potential returns per unit of risk. iShares Smart City is currently generating about 0.1 per unit of volatility. If you would invest 678.00 in iShares Smart City on August 28, 2024 and sell it today you would earn a total of 82.00 from holding iShares Smart City or generate 12.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. iShares Smart City
Performance |
| Timeline |
| iShares Core MSCI |
| iShares Smart City |
IShares Core and IShares Smart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares Smart
The main advantage of trading using opposite IShares Core and IShares Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares Smart 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 Smart will offset losses from the drop in IShares Smart's long position.| IShares Core vs. iShares Govt Bond | IShares Core vs. iShares Global AAA AA | IShares Core vs. iShares Smart City | IShares Core vs. iShares Broad High |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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