Correlation Between IShares Fundamental and IShares Premium

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

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

Diversification Opportunities for IShares Fundamental and IShares Premium

0.64

Correlation Coefficient

IShares Fundamental  IShares Premium

Poor diversification

The 3 months correlation between IShares and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and iShares Premium Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Premium Money and IShares Fundamental 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 Fundamental Hedged are associated (or correlated) with IShares Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Premium Money has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and IShares Premium go up and down completely randomly.

Pair Corralation between IShares Fundamental and IShares Premium

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 40.2 times more return on investment than IShares Premium. However, IShares Fundamental is 40.2 times more volatile than iShares Premium Money. It trades about 0.08 of its potential returns per unit of risk. iShares Premium Money is currently generating about 0.99 per unit of risk. If you would invest  4,150  in iShares Fundamental Hedged on September 24, 2024 and sell it today you would earn a total of  1,294  from holding iShares Fundamental Hedged or generate 31.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

iShares Fundamental Hedged  vs.  iShares Premium Money

iShares Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Fundamental Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Premium Money

Risk-Adjusted Performance

65 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Premium Money are ranked lower than 65 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Premium is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Fundamental and IShares Premium

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

The idea behind iShares Fundamental Hedged and iShares Premium Money 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.