Correlation Between IShares Core and Discipline Fund

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

By analyzing existing cross correlation between IShares Core Aggressive and Discipline Fund ETF, you can compare the effects of market volatilities on IShares Core and Discipline Fund 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 Discipline Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Discipline Fund.

Diversification Opportunities for IShares Core and Discipline Fund

Almost no diversification

The 3 months correlation between IShares and Discipline is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding IShares Core Aggressive and Discipline Fund ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discipline Fund ETF 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 Aggressive are associated (or correlated) with Discipline Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discipline Fund ETF has no effect on the direction of IShares Core i.e., IShares Core and Discipline Fund go up and down completely randomly.

Pair Corralation between IShares Core and Discipline Fund

Considering the 90-day investment horizon IShares Core Aggressive is expected to generate 1.61 times more return on investment than Discipline Fund. However, IShares Core is 1.61 times more volatile than Discipline Fund ETF. It trades about 0.06 of its potential returns per unit of risk. Discipline Fund ETF is currently generating about 0.04 per unit of risk. If you would invest  6,049  in IShares Core Aggressive on September 7, 2023 and sell it today you would earn a total of  616.00  from holding IShares Core Aggressive or generate 10.18% return on investment over 90 days.

IShares Core Aggressive  vs.  Discipline Fund ETF

IShares Core Aggressive

IShares Performance

4 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in IShares Core Aggressive are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Discipline Fund ETF

Discipline Performance

6 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Discipline Fund ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Discipline Fund is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and Discipline Fund

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

The idea behind IShares Core Aggressive and Discipline Fund ETF 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.