Correlation Between IShares SP and Freedom Day
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and Freedom Day Dividend, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Freedom Day.
Diversification Opportunities for IShares SP and Freedom Day
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Freedom is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 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 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 500 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 SP i.e., IShares SP and Freedom Day go up and down completely randomly.
Pair Corralation between IShares SP and Freedom Day
Considering the 90-day investment horizon IShares SP is expected to generate 1.36 times less return on investment than Freedom Day. But when comparing it to its historical volatility, iShares SP 500 is 1.02 times less risky than Freedom Day. It trades about 0.21 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,318 in Freedom Day Dividend on November 9, 2024 and sell it today you would earn a total of 121.00 from holding Freedom Day Dividend or generate 3.65% 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 500 vs. Freedom Day Dividend
Performance |
| Timeline |
| iShares SP 500 |
| Freedom Day Dividend |
IShares SP and Freedom Day Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Freedom Day
The main advantage of trading using opposite IShares SP and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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