Correlation Between IShares Infrastructure and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares Infrastructure and IShares 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 Infrastructure and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Infrastructure ETF and iShares Core SP, you can compare the effects of market volatilities on IShares Infrastructure and IShares 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 Infrastructure with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Infrastructure and IShares Core.
Diversification Opportunities for IShares Infrastructure and IShares Core
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Infrastructure ETF and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and IShares Infrastructure 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 Infrastructure ETF are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of IShares Infrastructure i.e., IShares Infrastructure and IShares Core go up and down completely randomly.
Pair Corralation between IShares Infrastructure and IShares Core
Given the investment horizon of 90 days iShares Infrastructure ETF is expected to generate 1.35 times more return on investment than IShares Core. However, IShares Infrastructure is 1.35 times more volatile than iShares Core SP. It trades about -0.09 of its potential returns per unit of risk. iShares Core SP is currently generating about -0.29 per unit of risk. If you would invest 4,214 in iShares Infrastructure ETF on January 20, 2024 and sell it today you would lose (77.00) from holding iShares Infrastructure ETF or give up 1.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Infrastructure ETF vs. iShares Core SP
Performance |
| Timeline |
| iShares Infrastructure |
| iShares Core SP |
IShares Infrastructure and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Infrastructure and IShares Core
The main advantage of trading using opposite IShares Infrastructure and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Infrastructure position performs unexpectedly, IShares 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 IShares Core will offset losses from the drop in IShares Core's long position.The idea behind iShares Infrastructure ETF and iShares Core SP 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.
| IShares Core vs. Dimensional Targeted Value | IShares Core vs. Dimensional World ex | IShares Core vs. Dimensional Small Cap |
Check out your portfolio center.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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