Correlation Between IShares Core and IShares EURO
Can any of the company-specific risk be diversified away by investing in both IShares Core and IShares EURO 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 IShares EURO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and iShares EURO STOXX, you can compare the effects of market volatilities on IShares Core and IShares EURO 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 IShares EURO. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and IShares EURO.
Diversification Opportunities for IShares Core and IShares EURO
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and iShares EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares EURO STOXX 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 MSCI are associated (or correlated) with IShares EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares EURO STOXX has no effect on the direction of IShares Core i.e., IShares Core and IShares EURO go up and down completely randomly.
Pair Corralation between IShares Core and IShares EURO
Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.18 times more return on investment than IShares EURO. However, IShares Core is 1.18 times more volatile than iShares EURO STOXX. It trades about 0.09 of its potential returns per unit of risk. iShares EURO STOXX is currently generating about 0.02 per unit of risk. If you would invest 3,114 in iShares Core MSCI on September 3, 2024 and sell it today you would earn a total of 165.00 from holding iShares Core MSCI or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. iShares EURO STOXX
Performance |
| Timeline |
| iShares Core MSCI |
| iShares EURO STOXX |
IShares Core and IShares EURO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and IShares EURO
The main advantage of trading using opposite IShares Core and IShares EURO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, IShares EURO 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 EURO will offset losses from the drop in IShares EURO's long position.| IShares Core vs. Vanguard FTSE Developed | IShares Core vs. HSBC MSCI Japan | IShares Core vs. iShares II Public | IShares Core vs. Hydratec Industries NV |
| IShares EURO vs. iShares III Public | IShares EURO vs. iShares Core MSCI | IShares EURO vs. iShares France Govt | IShares EURO vs. iShares Edge MSCI |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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