Correlation Between Pershing Square and IShares Core
Can any of the company-specific risk be diversified away by investing in both Pershing Square 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 Pershing Square and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pershing Square Holdings and iShares Core MSCI, you can compare the effects of market volatilities on Pershing Square 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 Pershing Square with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pershing Square and IShares Core.
Diversification Opportunities for Pershing Square and IShares Core
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pershing and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI and Pershing Square 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 Pershing Square Holdings 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 MSCI has no effect on the direction of Pershing Square i.e., Pershing Square and IShares Core go up and down completely randomly.
Pair Corralation between Pershing Square and IShares Core
Assuming the 90 days trading horizon Pershing Square Holdings is expected to generate 1.78 times more return on investment than IShares Core. However, Pershing Square is 1.78 times more volatile than iShares Core MSCI. It trades about -0.03 of its potential returns per unit of risk. iShares Core MSCI is currently generating about -0.05 per unit of risk. If you would invest 4,924 in Pershing Square Holdings on September 2, 2024 and sell it today you would lose (134.00) from holding Pershing Square Holdings or give up 2.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pershing Square Holdings vs. iShares Core MSCI
Performance |
| Timeline |
| Pershing Square Holdings |
| iShares Core MSCI |
Pershing Square and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pershing Square and IShares Core
The main advantage of trading using opposite Pershing Square and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pershing Square 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 Pershing Square Holdings and iShares Core MSCI 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 II Public | IShares Core vs. iShares SP 500 | IShares Core vs. iShares MSCI EM | IShares Core vs. iShares Euro 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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