Correlation Between IShares Core and IShares Edge
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares Edge 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 Edge 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 iShares Edge High, you can compare the effects of market volatilities on IShares Core and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares Edge.
Diversification Opportunities for IShares Core and IShares Edge
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares Edge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge High 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 IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge High has no effect on the direction of IShares Core i.e., IShares Core and IShares Edge go up and down completely randomly.
Pair Corralation between IShares Core and IShares Edge
Considering the 90-day investment horizon iShares Core SP is expected to generate 2.08 times more return on investment than IShares Edge. However, IShares Core is 2.08 times more volatile than iShares Edge High. It trades about 0.12 of its potential returns per unit of risk. iShares Edge High is currently generating about 0.11 per unit of risk. If you would invest 38,324 in iShares Core SP on August 30, 2024 and sell it today you would earn a total of 21,858 from holding iShares Core SP or generate 57.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. iShares Edge High
Performance |
| Timeline |
| iShares Core SP |
| iShares Edge High |
IShares Core and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares Edge
The main advantage of trading using opposite IShares Core and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge'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 |
| IShares Edge vs. iShares Edge Investment | IShares Edge vs. iShares Intl High | IShares Edge vs. iShares JP Morgan |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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