Correlation Between IShares Edge and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares Edge and IShares Global 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 Edge and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Edge MSCI and iShares Global Aggregate, you can compare the effects of market volatilities on IShares Edge and IShares Global 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 Edge with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and IShares Global.
Diversification Opportunities for IShares Edge and IShares Global
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and iShares Global Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Aggregate and IShares Edge 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 Edge MSCI are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Aggregate has no effect on the direction of IShares Edge i.e., IShares Edge and IShares Global go up and down completely randomly.
Pair Corralation between IShares Edge and IShares Global
Assuming the 90 days trading horizon iShares Edge MSCI is expected to generate 3.12 times more return on investment than IShares Global. However, IShares Edge is 3.12 times more volatile than iShares Global Aggregate. It trades about 0.18 of its potential returns per unit of risk. iShares Global Aggregate is currently generating about 0.09 per unit of risk. 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 Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Edge MSCI vs. iShares Global Aggregate
Performance |
| Timeline |
| iShares Edge MSCI |
| iShares Global Aggregate |
IShares Edge and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and IShares Global
The main advantage of trading using opposite IShares Edge and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.| IShares Edge vs. SPDR SP 500 | IShares Edge vs. Vanguard Total Market | IShares Edge vs. iShares Core SP | IShares Edge vs. iShares Core SP |
| IShares Global vs. BetaShares Geared Australian | IShares Global vs. BetaShares Global Robotics | IShares Global vs. iShares China LargeCap | IShares Global vs. Russell Australian Government |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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