Correlation Between IShares II and IShares Edge
Can any of the company-specific risk be diversified away by investing in both IShares II 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 IShares II and IShares Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares II Public and iShares Edge MSCI, you can compare the effects of market volatilities on IShares II 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 IShares II with a short position of IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares II and IShares Edge.
Diversification Opportunities for IShares II and IShares Edge
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and IShares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding iShares II Public 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 IShares II 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 II Public 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 IShares II i.e., IShares II and IShares Edge go up and down completely randomly.
Pair Corralation between IShares II and IShares Edge
Assuming the 90 days trading horizon iShares II Public is expected to under-perform the IShares Edge. In addition to that, IShares II is 1.28 times more volatile than iShares Edge MSCI. It trades about -0.03 of its total potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.02 per unit of volatility. If you would invest 13,788 in iShares Edge MSCI on September 1, 2024 and sell it today you would earn a total of 252.00 from holding iShares Edge MSCI or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
iShares II Public vs. iShares Edge MSCI
Performance |
| Timeline |
| iShares II Public |
| iShares Edge MSCI |
IShares II and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares II and IShares Edge
The main advantage of trading using opposite IShares II and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares II 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.| IShares II vs. iShares Core MSCI | IShares II vs. BlackRock ESG Multi Asset | IShares II vs. Pershing Square Holdings | IShares II vs. ASML Holding NV |
| IShares Edge vs. iShares Core MSCI | IShares Edge vs. BlackRock ESG Multi Asset | IShares Edge vs. Pershing Square Holdings | IShares Edge vs. ASML Holding NV |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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