Correlation Between IShares Core and IShares Thematic
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares Thematic 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 Thematic 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 Thematic Rotation, you can compare the effects of market volatilities on IShares Core and IShares Thematic 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 Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares Thematic.
Diversification Opportunities for IShares Core and IShares Thematic
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares Thematic Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Thematic Rotation 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 Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Thematic Rotation has no effect on the direction of IShares Core i.e., IShares Core and IShares Thematic go up and down completely randomly.
Pair Corralation between IShares Core and IShares Thematic
Considering the 90-day investment horizon IShares Core is expected to generate 1.22 times less return on investment than IShares Thematic. But when comparing it to its historical volatility, iShares Core SP is 1.18 times less risky than IShares Thematic. It trades about 0.14 of its potential returns per unit of risk. iShares Thematic Rotation is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,552 in iShares Thematic Rotation on September 12, 2024 and sell it today you would earn a total of 956.01 from holding iShares Thematic Rotation or generate 37.46% 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. iShares Thematic Rotation
Performance |
| Timeline |
| iShares Core SP |
| iShares Thematic Rotation |
IShares Core and IShares Thematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares Thematic
The main advantage of trading using opposite IShares Core and IShares Thematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares Thematic 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 Thematic will offset losses from the drop in IShares Thematic's long position.| IShares Core vs. Vanguard SP 500 | IShares Core vs. Vanguard Real Estate | IShares Core vs. Vanguard Total Bond | IShares Core vs. Vanguard High Dividend |
| IShares Thematic vs. Vanguard SP 500 | IShares Thematic vs. Vanguard Real Estate | IShares Thematic vs. Vanguard Total Bond | IShares Thematic vs. Vanguard High Dividend |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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