Correlation Between Freedom Day and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Freedom Day and IShares Trust 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 Freedom Day and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Day Dividend and iShares Trust, you can compare the effects of market volatilities on Freedom Day and IShares Trust 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 Freedom Day with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and IShares Trust.
Diversification Opportunities for Freedom Day and IShares Trust
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Freedom and IShares is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Freedom Day 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 Freedom Day Dividend are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Freedom Day i.e., Freedom Day and IShares Trust go up and down completely randomly.
Pair Corralation between Freedom Day and IShares Trust
Given the investment horizon of 90 days Freedom Day is expected to generate 485.44 times less return on investment than IShares Trust. But when comparing it to its historical volatility, Freedom Day Dividend is 234.65 times less risky than IShares Trust. It trades about 0.09 of its potential returns per unit of risk. iShares Trust is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.00 in iShares Trust on September 2, 2024 and sell it today you would earn a total of 2,558 from holding iShares Trust or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 5.65% |
| Values | Daily Returns |
Freedom Day Dividend vs. iShares Trust
Performance |
| Timeline |
| Freedom Day Dividend |
| iShares Trust |
Freedom Day and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Day and IShares Trust
The main advantage of trading using opposite Freedom Day and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust's long position.The idea behind Freedom Day Dividend and iShares Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Trust vs. Freedom Day Dividend | IShares Trust vs. iShares MSCI China | IShares Trust vs. iShares Dividend and | IShares Trust vs. SmartETFs Dividend Builder |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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