Correlation Between IShares Bloomberg and Direxion Auspice

Can any of the company-specific risk be diversified away by investing in both IShares Bloomberg and Direxion Auspice 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 Bloomberg and Direxion Auspice into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Bloomberg Roll and Direxion Auspice Broad, you can compare the effects of market volatilities on IShares Bloomberg and Direxion Auspice 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 Bloomberg with a short position of Direxion Auspice. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Bloomberg and Direxion Auspice.

Diversification Opportunities for IShares Bloomberg and Direxion Auspice

0.98

Correlation Coefficient

IShares Bloomberg  Direxion Auspice

Almost no diversification

The 3 months correlation between IShares and Direxion is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Bloomberg Roll and Direxion Auspice Broad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Auspice Broad and IShares Bloomberg 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 Bloomberg Roll are associated (or correlated) with Direxion Auspice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Auspice Broad has no effect on the direction of IShares Bloomberg i.e., IShares Bloomberg and Direxion Auspice go up and down completely randomly.

Pair Corralation between IShares Bloomberg and Direxion Auspice

Given the investment horizon of 90 days IShares Bloomberg is expected to generate 1.06 times less return on investment than Direxion Auspice. But when comparing it to its historical volatility, iShares Bloomberg Roll is 1.06 times less risky than Direxion Auspice. It trades about 0.15 of its potential returns per unit of risk. Direxion Auspice Broad is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,846  in Direxion Auspice Broad on February 1, 2024 and sell it today you would earn a total of  59.00  from holding Direxion Auspice Broad or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Bloomberg Roll  vs.  Direxion Auspice Broad

iShares Bloomberg Roll

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Bloomberg Roll are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares Bloomberg is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Direxion Auspice Broad

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Auspice Broad are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Direxion Auspice is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Bloomberg and Direxion Auspice

The main advantage of trading using opposite IShares Bloomberg and Direxion Auspice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Bloomberg position performs unexpectedly, Direxion Auspice 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 Direxion Auspice will offset losses from the drop in Direxion Auspice's long position.

The idea behind iShares Bloomberg Roll and Direxion Auspice Broad 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.

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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.