Correlation Between IShares JP and IShares Intl
Can any of the company-specific risk be diversified away by investing in both IShares JP and IShares Intl 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 JP and IShares Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares JP Morgan and iShares Intl High, you can compare the effects of market volatilities on IShares JP and IShares Intl 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 JP with a short position of IShares Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares JP and IShares Intl.
Diversification Opportunities for IShares JP and IShares Intl
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and iShares Intl High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Intl High and IShares JP 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 JP Morgan are associated (or correlated) with IShares Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Intl High has no effect on the direction of IShares JP i.e., IShares JP and IShares Intl go up and down completely randomly.
Pair Corralation between IShares JP and IShares Intl
Given the investment horizon of 90 days IShares JP is expected to generate 1.24 times less return on investment than IShares Intl. But when comparing it to its historical volatility, iShares JP Morgan is 1.32 times less risky than IShares Intl. It trades about 0.12 of its potential returns per unit of risk. iShares Intl High is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,893 in iShares Intl High on August 28, 2024 and sell it today you would earn a total of 585.00 from holding iShares Intl High or generate 15.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares JP Morgan vs. iShares Intl High
Performance |
| Timeline |
| iShares JP Morgan |
| iShares Intl High |
IShares JP and IShares Intl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares JP and IShares Intl
The main advantage of trading using opposite IShares JP and IShares Intl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares JP position performs unexpectedly, IShares Intl 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 Intl will offset losses from the drop in IShares Intl's long position.The idea behind iShares JP Morgan and iShares Intl High 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.| IShares Intl vs. First Trust Senior | IShares Intl vs. First Trust Low | IShares Intl vs. First Trust Enhanced | IShares Intl vs. First Trust TCW |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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