Correlation Between IShares SP and Listed Funds

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Can any of the company-specific risk be diversified away by investing in both IShares SP and Listed 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 SP and Listed Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares SP 500 and Listed Funds Trust, you can compare the effects of market volatilities on IShares SP and Listed 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 SP with a short position of Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Listed Funds.

Diversification Opportunities for IShares SP and Listed Funds

  Correlation Coefficient

Very poor diversification

The 3 months correlation between IShares and Listed is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding IShares SP 500 and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust and IShares SP 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 SP 500 are associated (or correlated) with Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of IShares SP i.e., IShares SP and Listed Funds go up and down completely randomly.

Pair Corralation between IShares SP and Listed Funds

Considering the 90-day investment horizon IShares SP 500 is expected to generate 1.09 times more return on investment than Listed Funds. However, IShares SP is 1.09 times more volatile than Listed Funds Trust. It trades about 0.21 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.11 per unit of risk. If you would invest  15,291  in IShares SP 500 on September 1, 2023 and sell it today you would earn a total of  1,147  from holding IShares SP 500 or generate 7.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

IShares SP 500  vs.  Listed Funds Trust

IShares SP 500 

IShares Performance

2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in IShares SP 500 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Listed Funds Trust 

Listed Performance

0 of 100
Over the last 90 days Listed Funds Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Listed Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

IShares SP and Listed Funds Volatility Contrast

   Predicted Return Density   

Pair Trading with IShares SP and Listed Funds

The main advantage of trading using opposite IShares SP and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, Listed 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 Listed Funds will offset losses from the drop in Listed Funds' long position.
The idea behind IShares SP 500 and Listed Funds Trust 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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