Correlation Between IShares Core and IShares SP

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares SP 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 SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SPTSX and iShares SP Small Cap, you can compare the effects of market volatilities on IShares Core and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares SP.

Diversification Opportunities for IShares Core and IShares SP

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IShares and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small 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 SPTSX are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of IShares Core i.e., IShares Core and IShares SP go up and down completely randomly.

Pair Corralation between IShares Core and IShares SP

Assuming the 90 days trading horizon iShares Core SPTSX is expected to generate 0.54 times more return on investment than IShares SP. However, iShares Core SPTSX is 1.85 times less risky than IShares SP. It trades about 0.13 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about 0.06 per unit of risk. If you would invest  3,042  in iShares Core SPTSX on September 12, 2024 and sell it today you would earn a total of  1,035  from holding iShares Core SPTSX or generate 34.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

iShares Core SPTSX  vs.  iShares SP Small Cap

 Performance 
       Timeline  
iShares Core SPTSX 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPTSX are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.
iShares SP Small 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Small Cap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IShares Core and IShares SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Core and IShares SP

The main advantage of trading using opposite IShares Core and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.
The idea behind iShares Core SPTSX and iShares SP Small Cap 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.
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

Other Complementary Tools

Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device