Correlation Between IShares Asia and IShares SP
Can any of the company-specific risk be diversified away by investing in both IShares Asia and IShares SP 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 Asia and IShares SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Asia 50 and iShares SP 500, you can compare the effects of market volatilities on IShares Asia and IShares SP 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 Asia with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Asia and IShares SP.
Diversification Opportunities for IShares Asia and IShares SP
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia 50 and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and IShares Asia 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 Asia 50 are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of IShares Asia i.e., IShares Asia and IShares SP go up and down completely randomly.
Pair Corralation between IShares Asia and IShares SP
Assuming the 90 days trading horizon iShares Asia 50 is expected to generate 1.75 times more return on investment than IShares SP. However, IShares Asia is 1.75 times more volatile than iShares SP 500. It trades about 0.36 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.04 per unit of risk. If you would invest 10,884 in iShares Asia 50 on November 27, 2024 and sell it today you would earn a total of 1,142 from holding iShares Asia 50 or generate 10.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Asia 50 vs. iShares SP 500
Performance |
| Timeline |
| iShares Asia 50 |
| iShares SP 500 |
IShares Asia and IShares SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Asia and IShares SP
The main advantage of trading using opposite IShares Asia and IShares SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Asia position performs unexpectedly, IShares SP 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 SP will offset losses from the drop in IShares SP's long position.| IShares Asia vs. iShares MSCI Emerging | IShares Asia vs. iShares Global Aggregate | IShares Asia vs. iShares CoreSP MidCap | IShares Asia vs. iShares SP 500 |
| IShares SP vs. iShares MSCI Emerging | IShares SP vs. iShares Global Aggregate | IShares SP vs. iShares CoreSP MidCap | IShares SP vs. iShares 20 Year |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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