Correlation Between BetaShares Australia and IShares Edge
Can any of the company-specific risk be diversified away by investing in both BetaShares Australia and IShares Edge 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 BetaShares Australia and IShares Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BetaShares Australia 200 and iShares Edge MSCI, you can compare the effects of market volatilities on BetaShares Australia and IShares Edge 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 BetaShares Australia with a short position of IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Australia and IShares Edge.
Diversification Opportunities for BetaShares Australia and IShares Edge
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BetaShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australia 200 and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI and BetaShares Australia 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 BetaShares Australia 200 are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of BetaShares Australia i.e., BetaShares Australia and IShares Edge go up and down completely randomly.
Pair Corralation between BetaShares Australia and IShares Edge
Assuming the 90 days trading horizon BetaShares Australia is expected to generate 1.45 times less return on investment than IShares Edge. But when comparing it to its historical volatility, BetaShares Australia 200 is 1.22 times less risky than IShares Edge. It trades about 0.15 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,450 in iShares Edge MSCI on August 29, 2024 and sell it today you would earn a total of 94.00 from holding iShares Edge MSCI or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BetaShares Australia 200 vs. iShares Edge MSCI
Performance |
| Timeline |
| BetaShares Australia 200 |
| iShares Edge MSCI |
BetaShares Australia and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BetaShares Australia and IShares Edge
The main advantage of trading using opposite BetaShares Australia and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Australia position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| BetaShares Australia vs. SPDR SP 500 | BetaShares Australia vs. Vanguard Total Market | BetaShares Australia vs. iShares Core SP | BetaShares Australia vs. iShares Core SP |
| IShares Edge vs. SPDR SP 500 | IShares Edge vs. Vanguard Total Market | IShares Edge vs. iShares Core SP | IShares Edge vs. iShares Core SP |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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