Correlation Between IShares Core and Vident Core

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

Diversification Opportunities for IShares Core and Vident Core

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Vident is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Total and Vident Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Bond 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 Total are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Bond has no effect on the direction of IShares Core i.e., IShares Core and Vident Core go up and down completely randomly.

Pair Corralation between IShares Core and Vident Core

Given the investment horizon of 90 days iShares Core Total is expected to under-perform the Vident Core. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Total is 1.03 times less risky than Vident Core. The etf trades about -0.16 of its potential returns per unit of risk. The Vident Core Bond is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  4,337  in Vident Core Bond on January 17, 2024 and sell it today you would lose (31.00) from holding Vident Core Bond or give up 0.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

iShares Core Total  vs.  Vident Core Bond

 Performance 
       Timeline  
iShares Core Total 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares Core Total has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
Vident Core Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vident Core Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IShares Core and Vident Core Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Core and Vident Core

The main advantage of trading using opposite IShares Core and Vident Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Vident 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 Vident Core will offset losses from the drop in Vident Core's long position.
The idea behind iShares Core Total and Vident Core Bond 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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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