Correlation Between IShares Trust and Dynamic Active

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

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

Diversification Opportunities for IShares Trust and Dynamic Active

0.95

Correlation Coefficient

IShares Trust  Dynamic Active

Almost no diversification

The 3 months correlation between IShares and Dynamic is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Dynamic Active Crossover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Active Crossover and IShares Trust 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 Trust are associated (or correlated) with Dynamic Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Active Crossover has no effect on the direction of IShares Trust i.e., IShares Trust and Dynamic Active go up and down completely randomly.

Pair Corralation between IShares Trust and Dynamic Active

Given the investment horizon of 90 days IShares Trust is expected to generate 1.06 times less return on investment than Dynamic Active. But when comparing it to its historical volatility, iShares Trust is 1.18 times less risky than Dynamic Active. It trades about 0.3 of its potential returns per unit of risk. Dynamic Active Crossover is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,894  in Dynamic Active Crossover on May 3, 2025 and sell it today you would earn a total of  59.00  from holding Dynamic Active Crossover or generate 3.12% return on investment over 90 days.

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

iShares Trust   vs.  Dynamic Active Crossover

iShares Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dynamic Active Crossover

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Active Crossover are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dynamic Active is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Dynamic Active

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

The idea behind iShares Trust and Dynamic Active Crossover 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.