Correlation Between IShares SP and IShares Core

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

By analyzing existing cross correlation between iShares SP Mid Cap and iShares Core Canadian, you can compare the effects of market volatilities on IShares SP and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares Core.

Diversification Opportunities for IShares SP and IShares Core

0.9

Correlation Coefficient

IShares SP  IShares Core

Almost no diversification

The 3 months correlation between IShares and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Mid Cap and iShares Core Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Canadian 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 Mid Cap are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Canadian has no effect on the direction of IShares SP i.e., IShares SP and IShares Core go up and down completely randomly.

Pair Corralation between IShares SP and IShares Core

Assuming the 90 days trading horizon iShares SP Mid Cap is expected to generate 9.15 times more return on investment than IShares Core. However, IShares SP is 9.15 times more volatile than iShares Core Canadian. It trades about 0.25 of its potential returns per unit of risk. iShares Core Canadian is currently generating about 0.15 per unit of risk. If you would invest  2,387  in iShares SP Mid Cap on April 20, 2025 and sell it today you would earn a total of  425.00  from holding iShares SP Mid Cap or generate 17.8% 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 Mid Cap  vs.  iShares Core Canadian

iShares SP Mid

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Mid Cap are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, IShares SP displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares Core Canadian

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Canadian are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, IShares Core 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 SP and IShares Core

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

The idea behind iShares SP Mid Cap and iShares Core Canadian 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.