Correlation Between IShares VII and IShares NASDAQ
Can any of the company-specific risk be diversified away by investing in both IShares VII and IShares NASDAQ 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 VII and IShares NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares VII PLC and iShares NASDAQ 100, you can compare the effects of market volatilities on IShares VII and IShares NASDAQ 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 VII with a short position of IShares NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares VII and IShares NASDAQ.
Diversification Opportunities for IShares VII and IShares NASDAQ
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and iShares NASDAQ 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NASDAQ 100 and IShares VII 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 VII PLC are associated (or correlated) with IShares NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NASDAQ 100 has no effect on the direction of IShares VII i.e., IShares VII and IShares NASDAQ go up and down completely randomly.
Pair Corralation between IShares VII and IShares NASDAQ
Assuming the 90 days trading horizon IShares VII is expected to generate 1.54 times less return on investment than IShares NASDAQ. In addition to that, IShares VII is 1.22 times more volatile than iShares NASDAQ 100. It trades about 0.16 of its total potential returns per unit of risk. iShares NASDAQ 100 is currently generating about 0.3 per unit of volatility. If you would invest 114,480 in iShares NASDAQ 100 on May 3, 2025 and sell it today you would earn a total of 19,680 from holding iShares NASDAQ 100 or generate 17.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares VII PLC vs. iShares NASDAQ 100
Performance |
| Timeline |
| iShares VII PLC |
| iShares NASDAQ 100 |
IShares VII and IShares NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares VII and IShares NASDAQ
The main advantage of trading using opposite IShares VII and IShares NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII position performs unexpectedly, IShares NASDAQ 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 NASDAQ will offset losses from the drop in IShares NASDAQ's long position.| IShares VII vs. iShares Emerging Asia | IShares VII vs. iShares MSCI Global | IShares VII vs. iShares VII PLC | IShares VII vs. iShares iBonds Dec |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against IShares NASDAQ as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. IShares NASDAQ's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, IShares NASDAQ's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to iShares NASDAQ 100.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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