Correlation Between IShares Core and MegaShort Semiconductors

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

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

Diversification Opportunities for IShares Core and MegaShort Semiconductors

0.24

Correlation Coefficient

IShares Core  MegaShort Semiconductors

Modest diversification

The 3 months correlation between IShares and MegaShort is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and MegaShort Semiconductors Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MegaShort Semiconductors and IShares Core 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 Core SPTSX are associated (or correlated) with MegaShort Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MegaShort Semiconductors has no effect on the direction of IShares Core i.e., IShares Core and MegaShort Semiconductors go up and down completely randomly.

Pair Corralation between IShares Core and MegaShort Semiconductors

Assuming the 90 days trading horizon iShares Core SPTSX is expected to generate 0.09 times more return on investment than MegaShort Semiconductors. However, iShares Core SPTSX is 10.6 times less risky than MegaShort Semiconductors. It trades about 0.48 of its potential returns per unit of risk. MegaShort Semiconductors Daily is currently generating about -0.32 per unit of risk. If you would invest  3,853  in iShares Core SPTSX on April 22, 2025 and sell it today you would earn a total of  506.00  from holding iShares Core SPTSX or generate 13.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.08%
Values	Daily Returns

iShares Core SPTSX  vs.  MegaShort Semiconductors Daily

iShares Core SPTSX

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SPTSX are ranked lower than 37 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in August 2025.

MegaShort Semiconductors

Risk-Adjusted Performance

Very Weak

Over the last 90 days MegaShort Semiconductors Daily has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with IShares Core and MegaShort Semiconductors

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

The idea behind iShares Core SPTSX and MegaShort Semiconductors Daily 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.