Correlation Between IShares Intl and IShares JP
Can any of the company-specific risk be diversified away by investing in both IShares Intl and IShares JP 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 Intl and IShares JP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Intl High and iShares JP Morgan, you can compare the effects of market volatilities on IShares Intl and IShares JP 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 Intl with a short position of IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Intl and IShares JP.
Diversification Opportunities for IShares Intl and IShares JP
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intl High and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and IShares Intl 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 Intl High are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of IShares Intl i.e., IShares Intl and IShares JP go up and down completely randomly.
Pair Corralation between IShares Intl and IShares JP
Given the investment horizon of 90 days IShares Intl is expected to generate 6.38 times less return on investment than IShares JP. But when comparing it to its historical volatility, iShares Intl High is 1.29 times less risky than IShares JP. It trades about 0.03 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,758 in iShares JP Morgan on August 28, 2024 and sell it today you would earn a total of 129.00 from holding iShares JP Morgan or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Intl High vs. iShares JP Morgan
Performance |
| Timeline |
| iShares Intl High |
| iShares JP Morgan |
IShares Intl and IShares JP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Intl and IShares JP
The main advantage of trading using opposite IShares Intl and IShares JP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Intl position performs unexpectedly, IShares JP 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 JP will offset losses from the drop in IShares JP's long position.| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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