Correlation Between ETF Series and IShares Core
Can any of the company-specific risk be diversified away by investing in both ETF Series and IShares Core 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 ETF Series and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETF Series Solutions and iShares Core Growth, you can compare the effects of market volatilities on ETF Series and IShares Core 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 ETF Series with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETF Series and IShares Core.
Diversification Opportunities for ETF Series and IShares Core
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETF and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and iShares Core Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Growth and ETF Series 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 ETF Series Solutions are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Growth has no effect on the direction of ETF Series i.e., ETF Series and IShares Core go up and down completely randomly.
Pair Corralation between ETF Series and IShares Core
Given the investment horizon of 90 days ETF Series Solutions is expected to generate 1.76 times more return on investment than IShares Core. However, ETF Series is 1.76 times more volatile than iShares Core Growth. It trades about 0.13 of its potential returns per unit of risk. iShares Core Growth is currently generating about 0.07 per unit of risk. If you would invest 2,922 in ETF Series Solutions on August 28, 2024 and sell it today you would earn a total of 194.00 from holding ETF Series Solutions or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETF Series Solutions vs. iShares Core Growth
Performance |
| Timeline |
| ETF Series Solutions |
| iShares Core Growth |
ETF Series and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETF Series and IShares Core
The main advantage of trading using opposite ETF Series and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.The idea behind ETF Series Solutions and iShares Core Growth 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 Core vs. iShares Core Moderate | IShares Core vs. iShares Core Aggressive | IShares Core vs. iShares Core Conservative | IShares Core vs. Vanguard Mega 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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