Correlation Between IShares Select and IShares Core

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

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

Diversification Opportunities for IShares Select and IShares Core

0.89

Correlation Coefficient

IShares Select  IShares Core

Very poor diversification

The @@bw1eo months correlation between IShares and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and iShares Core Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Dividend and IShares Select 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 Select Dividend 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 Dividend has no effect on the direction of IShares Select i.e., IShares Select and IShares Core go up and down completely randomly.

Pair Corralation between IShares Select and IShares Core

Considering the 90-day investment horizon IShares Select is expected to generate 3.02 times less return on investment than IShares Core. In addition to that, IShares Select is 1.11 times more volatile than iShares Core Dividend. It trades about 0.01 of its total potential returns per unit of risk. iShares Core Dividend is currently generating about 0.04 per unit of volatility. If you would invest  4,763  in iShares Core Dividend on February 4, 2024 and sell it today you would earn a total of  886.00  from holding iShares Core Dividend or generate 18.6% return on investment over 90 days.

Time Period	@@bw1EO Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

iShares Select Dividend  vs.  iShares Core Dividend

iShares Select Dividend

Risk-Adjusted Performance

1 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Core Dividend

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days iShares Core Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Core 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 Select and IShares Core

The main advantage of trading using opposite IShares Select and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Select 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 iShares Select Dividend and iShares Core Dividend 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.