Correlation Between IShares Global and Select STOXX
Can any of the company-specific risk be diversified away by investing in both IShares Global and Select STOXX 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 Global and Select STOXX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Industrials and Select STOXX Europe, you can compare the effects of market volatilities on IShares Global and Select STOXX 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 Global with a short position of Select STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Select STOXX.
Diversification Opportunities for IShares Global and Select STOXX
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Select is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Industrials and Select STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select STOXX Europe and IShares Global 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 Global Industrials are associated (or correlated) with Select STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select STOXX Europe has no effect on the direction of IShares Global i.e., IShares Global and Select STOXX go up and down completely randomly.
Pair Corralation between IShares Global and Select STOXX
Considering the 90-day investment horizon IShares Global is expected to generate 1.79 times less return on investment than Select STOXX. But when comparing it to its historical volatility, iShares Global Industrials is 1.06 times less risky than Select STOXX. It trades about 0.26 of its potential returns per unit of risk. Select STOXX Europe is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 2,440 in Select STOXX Europe on November 3, 2024 and sell it today you would earn a total of 220.00 from holding Select STOXX Europe or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Industrials vs. Select STOXX Europe
Performance |
| Timeline |
| iShares Global Indus |
| Select STOXX Europe |
IShares Global and Select STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and Select STOXX
The main advantage of trading using opposite IShares Global and Select STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, Select STOXX 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 Select STOXX will offset losses from the drop in Select STOXX's long position.| IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Utilities | IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Materials |
| Select STOXX vs. Ultimus Managers Trust | Select STOXX vs. American Beacon Select | Select STOXX vs. First Trust Indxx | Select STOXX vs. Direxion Daily 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 Stocks Directory module to find actively traded stocks across global markets.
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