Correlation Between IShares SMI and IShares VII

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

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

Diversification Opportunities for IShares SMI and IShares VII

-0.67

Correlation Coefficient

IShares SMI  IShares VII

Excellent diversification

The 3 months correlation between IShares and IShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares SMI ETF and iShares VII PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII PLC and IShares SMI 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 SMI ETF are associated (or correlated) with IShares VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII PLC has no effect on the direction of IShares SMI i.e., IShares SMI and IShares VII go up and down completely randomly.

Pair Corralation between IShares SMI and IShares VII

Assuming the 90 days trading horizon iShares SMI ETF is expected to under-perform the IShares VII. But the etf apears to be less risky and, when comparing its historical volatility, iShares SMI ETF is 1.48 times less risky than IShares VII. The etf trades about -0.07 of its potential returns per unit of risk. The iShares VII PLC is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  18,898  in iShares VII PLC on May 9, 2025 and sell it today you would earn a total of  2,032  from holding iShares VII PLC or generate 10.75% return on investment over 90 days.

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

iShares SMI ETF  vs.  iShares VII PLC

iShares SMI ETF

Risk-Adjusted Performance

Weakest

Over the last 90 days iShares SMI ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares SMI is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

iShares VII PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with IShares SMI and IShares VII

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

The idea behind iShares SMI ETF and iShares VII PLC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.