Correlation Between VictoryShares USAA and IShares Core

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

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

Diversification Opportunities for VictoryShares USAA and IShares Core

0.99

Correlation Coefficient

VictoryShares USAA  IShares Core

No risk reduction

The 3 months correlation between VictoryShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares USAA Core and iShares Core Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggregate and VictoryShares USAA 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 VictoryShares USAA Core 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 Aggregate has no effect on the direction of VictoryShares USAA i.e., VictoryShares USAA and IShares Core go up and down completely randomly.

Pair Corralation between VictoryShares USAA and IShares Core

Given the investment horizon of 90 days VictoryShares USAA Core is expected to generate 0.98 times more return on investment than IShares Core. However, VictoryShares USAA Core is 1.02 times less risky than IShares Core. It trades about -0.01 of its potential returns per unit of risk. iShares Core Aggregate is currently generating about -0.02 per unit of risk. If you would invest  4,580  in VictoryShares USAA Core on February 5, 2024 and sell it today you would lose (6.00) from holding VictoryShares USAA Core or give up 0.13% of portfolio value over 90 days.

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

VictoryShares USAA Core  vs.  iShares Core Aggregate

VictoryShares USAA Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VictoryShares USAA Core has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VictoryShares USAA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Core Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VictoryShares USAA and IShares Core

The main advantage of trading using opposite VictoryShares USAA and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares USAA 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 VictoryShares USAA Core and iShares Core Aggregate 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.