Correlation Between IShares Small and IShares SP
Can any of the company-specific risk be diversified away by investing in both IShares Small 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 Small 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 Small Cap and iShares SP Mid Cap, you can compare the effects of market volatilities on IShares Small 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 Small with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Small and IShares SP.
Diversification Opportunities for IShares Small and IShares SP
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Small Cap and iShares SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Mid and IShares Small 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 Small Cap 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 Mid has no effect on the direction of IShares Small i.e., IShares Small and IShares SP go up and down completely randomly.
Pair Corralation between IShares Small and IShares SP
Assuming the 90 days trading horizon iShares Small Cap is expected to generate 1.33 times more return on investment than IShares SP. However, IShares Small is 1.33 times more volatile than iShares SP Mid Cap. It trades about 0.1 of its potential returns per unit of risk. iShares SP Mid Cap is currently generating about 0.13 per unit of risk. If you would invest 3,966 in iShares Small Cap on September 1, 2024 and sell it today you would earn a total of 736.00 from holding iShares Small Cap or generate 18.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
iShares Small Cap vs. iShares SP Mid Cap
Performance |
| Timeline |
| iShares Small Cap |
| iShares SP Mid |
IShares Small and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Small and IShares SP
The main advantage of trading using opposite IShares Small and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Small 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.| IShares Small vs. iShares SPTSX Small | IShares Small vs. iShares Canadian Value | IShares Small vs. iShares Canadian Growth | IShares Small vs. iShares SPTSX Completion |
| IShares SP vs. iShares SPTSX Small | IShares SP vs. iShares Canadian Value | IShares SP vs. iShares Canadian Growth | IShares SP vs. iShares SPTSX Completion |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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