Correlation Between Add Value and IShares SP

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

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

Diversification Opportunities for Add Value and IShares SP

0.93

Correlation Coefficient

Add Value  IShares SP

Almost no diversification

The 3 months correlation between Add and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Add Value Fund and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and Add Value 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 Add Value Fund are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Add Value i.e., Add Value and IShares SP go up and down completely randomly.

Pair Corralation between Add Value and IShares SP

Assuming the 90 days trading horizon Add Value is expected to generate 1.05 times less return on investment than IShares SP. In addition to that, Add Value is 1.5 times more volatile than iShares SP 500. It trades about 0.2 of its total potential returns per unit of risk. iShares SP 500 is currently generating about 0.31 per unit of volatility. If you would invest  611.00  in iShares SP 500 on April 24, 2025 and sell it today you would earn a total of  101.00  from holding iShares SP 500 or generate 16.53% return on investment over 90 days.

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

Add Value Fund  vs.  iShares SP 500

Add Value Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Add Value Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating basic indicators, Add Value sustained solid returns over the last few months and may actually be approaching a breakup point.

iShares SP 500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Add Value and IShares SP

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

The idea behind Add Value Fund and iShares SP 500 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 Global Correlations module to find global opportunities by holding instruments from different markets.