Correlation Between Main Sector and IShares Core

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Can any of the company-specific risk be diversified away by investing in both Main Sector 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 Main Sector and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Sector Rotation and IShares Core SP, you can compare the effects of market volatilities on Main Sector 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 Main Sector with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Sector and IShares Core.

Diversification Opportunities for Main Sector and IShares Core

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Main and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Main Sector Rotation and IShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Core SP and Main Sector 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 Main Sector Rotation 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 SP has no effect on the direction of Main Sector i.e., Main Sector and IShares Core go up and down completely randomly.

Pair Corralation between Main Sector and IShares Core

Given the investment horizon of 90 days Main Sector Rotation is expected to generate 0.98 times more return on investment than IShares Core. However, Main Sector Rotation is 1.02 times less risky than IShares Core. It trades about 0.04 of its potential returns per unit of risk. IShares Core SP is currently generating about 0.04 per unit of risk. If you would invest  4,074  in Main Sector Rotation on December 30, 2023 and sell it today you would earn a total of  964.00  from holding Main Sector Rotation or generate 23.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Main Sector Rotation  vs.  IShares Core SP

 Performance 
       Timeline  
Main Sector Rotation 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Main Sector Rotation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Main Sector may actually be approaching a critical reversion point that can send shares even higher in April 2024.
IShares Core SP 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Core SP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Main Sector and IShares Core Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Main Sector and IShares Core

The main advantage of trading using opposite Main Sector and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Sector 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 Main Sector Rotation and IShares Core SP 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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