Correlation Between STF Tactical and IShares Core

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

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

Diversification Opportunities for STF Tactical and IShares Core

0.85

Correlation Coefficient

STF Tactical  IShares Core

Very poor diversification

The 3 months correlation between STF and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding STF Tactical Growth and iShares Core Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Growth and STF Tactical 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 STF Tactical Growth 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 Growth has no effect on the direction of STF Tactical i.e., STF Tactical and IShares Core go up and down completely randomly.

Pair Corralation between STF Tactical and IShares Core

Considering the 90-day investment horizon STF Tactical Growth is expected to generate 1.68 times more return on investment than IShares Core. However, STF Tactical is 1.68 times more volatile than iShares Core Growth. It trades about 0.11 of its potential returns per unit of risk. iShares Core Growth is currently generating about 0.08 per unit of risk. If you would invest  2,199  in STF Tactical Growth on January 30, 2024 and sell it today you would earn a total of  898.00  from holding STF Tactical Growth or generate 40.84% return on investment over 90 days.

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

STF Tactical Growth  vs.  iShares Core Growth

STF Tactical Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, STF Tactical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Core Growth

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with STF Tactical and IShares Core

The main advantage of trading using opposite STF Tactical and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STF Tactical 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 STF Tactical Growth and iShares Core Growth 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.