Correlation Between IShares Core and Avantis Equity
Can any of the company-specific risk be diversified away by investing in both IShares Core and Avantis Equity 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 Avantis Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and Avantis Equity ETF, you can compare the effects of market volatilities on IShares Core and Avantis Equity 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 Avantis Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Avantis Equity.
Diversification Opportunities for IShares Core and Avantis Equity
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Avantis is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Avantis Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Equity ETF 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 SP are associated (or correlated) with Avantis Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Equity ETF has no effect on the direction of IShares Core i.e., IShares Core and Avantis Equity go up and down completely randomly.
Pair Corralation between IShares Core and Avantis Equity
Considering the 90-day investment horizon IShares Core is expected to generate 1.6 times less return on investment than Avantis Equity. But when comparing it to its historical volatility, iShares Core SP is 1.14 times less risky than Avantis Equity. It trades about 0.18 of its potential returns per unit of risk. Avantis Equity ETF is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 9,611 in Avantis Equity ETF on August 31, 2024 and sell it today you would earn a total of 514.00 from holding Avantis Equity ETF or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. Avantis Equity ETF
Performance |
| Timeline |
| iShares Core SP |
| Avantis Equity ETF |
IShares Core and Avantis Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Avantis Equity
The main advantage of trading using opposite IShares Core and Avantis Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Avantis Equity 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 Avantis Equity will offset losses from the drop in Avantis Equity's long position.| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP 500 | IShares Core vs. iShares Russell 2000 |
| Avantis Equity vs. Avantis International Equity | Avantis Equity vs. Avantis Emerging Markets | Avantis Equity vs. Avantis Small Cap | Avantis Equity vs. Avantis International Small |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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