Correlation Between IShares Core and American Funds

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

Diversification Opportunities for IShares Core and American Funds

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between IShares and American is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding IShares Core SP and AMERICAN FUNDS GLOBAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Global and IShares Core 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 Core SP are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Global has no effect on the direction of IShares Core i.e., IShares Core and American Funds go up and down completely randomly.

Pair Corralation between IShares Core and American Funds

Given the investment horizon of 90 days IShares Core SP is expected to generate 0.9 times more return on investment than American Funds. However, IShares Core SP is 1.11 times less risky than American Funds. It trades about 0.25 of its potential returns per unit of risk. American Funds Global is currently generating about 0.19 per unit of risk. If you would invest  11,141  in IShares Core SP on December 29, 2023 and sell it today you would earn a total of  386.00  from holding IShares Core SP or generate 3.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

IShares Core SP  vs.  AMERICAN FUNDS GLOBAL

 Performance 
       Timeline  
IShares Core SP 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Core SP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in April 2024.
American Funds Global 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Global are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, American Funds may actually be approaching a critical reversion point that can send shares even higher in April 2024.

IShares Core and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Core and American Funds

The main advantage of trading using opposite IShares Core and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.
The idea behind IShares Core SP and American Funds Global 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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