Correlation Between IShares Mortgage and IShares Cohen

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

By analyzing existing cross correlation between iShares Mortgage Real and iShares Cohen Steers, you can compare the effects of market volatilities on IShares Mortgage and IShares Cohen 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 Mortgage with a short position of IShares Cohen. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Mortgage and IShares Cohen.

Diversification Opportunities for IShares Mortgage and IShares Cohen

0.52

Correlation Coefficient

IShares Mortgage  IShares Cohen

Very weak diversification

The 3 months correlation between IShares and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Mortgage Real and iShares Cohen Steers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Cohen Steers and IShares Mortgage 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 Mortgage Real are associated (or correlated) with IShares Cohen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Cohen Steers has no effect on the direction of IShares Mortgage i.e., IShares Mortgage and IShares Cohen go up and down completely randomly.

Pair Corralation between IShares Mortgage and IShares Cohen

Considering the 90-day investment horizon iShares Mortgage Real is expected to generate 1.12 times more return on investment than IShares Cohen. However, IShares Mortgage is 1.12 times more volatile than iShares Cohen Steers. It trades about -0.04 of its potential returns per unit of risk. iShares Cohen Steers is currently generating about -0.12 per unit of risk. If you would invest  2,253  in iShares Mortgage Real on January 26, 2024 and sell it today you would lose (37.00) from holding iShares Mortgage Real or give up 1.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

iShares Mortgage Real  vs.  iShares Cohen Steers

iShares Mortgage Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Mortgage Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Cohen Steers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Cohen Steers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, IShares Cohen 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 Mortgage and IShares Cohen

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

The idea behind iShares Mortgage Real and iShares Cohen Steers 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.