Correlation Between IShares SP and Macquarie ETF

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

By analyzing existing cross correlation between iShares SP 500 and Macquarie ETF Trust, you can compare the effects of market volatilities on IShares SP and Macquarie ETF 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 SP with a short position of Macquarie ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Macquarie ETF.

Diversification Opportunities for IShares SP and Macquarie ETF

0.96

Correlation Coefficient

IShares SP  Macquarie ETF

Almost no diversification

The 3 months correlation between IShares and Macquarie is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Macquarie ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie ETF Trust and IShares SP 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 SP 500 are associated (or correlated) with Macquarie ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie ETF Trust has no effect on the direction of IShares SP i.e., IShares SP and Macquarie ETF go up and down completely randomly.

Pair Corralation between IShares SP and Macquarie ETF

Considering the 90-day investment horizon iShares SP 500 is expected to generate 1.18 times more return on investment than Macquarie ETF. However, IShares SP is 1.18 times more volatile than Macquarie ETF Trust. It trades about 0.06 of its potential returns per unit of risk. Macquarie ETF Trust is currently generating about 0.03 per unit of risk. If you would invest  9,800  in iShares SP 500 on August 23, 2024 and sell it today you would earn a total of  154.00  from holding iShares SP 500 or generate 1.57% return on investment over 90 days.

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

iShares SP 500  vs.  Macquarie ETF Trust

iShares SP 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Macquarie ETF Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Macquarie ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares SP and Macquarie ETF

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

The idea behind iShares SP 500 and Macquarie ETF Trust 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.