Correlation Between IShares III and IShares Dow
Can any of the company-specific risk be diversified away by investing in both IShares III and IShares Dow 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 III and IShares Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares III Public and iShares Dow Jones, you can compare the effects of market volatilities on IShares III and IShares Dow 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 III with a short position of IShares Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares III and IShares Dow.
Diversification Opportunities for IShares III and IShares Dow
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and IShares is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding iShares III Public and iShares Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dow Jones and IShares III 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 III Public are associated (or correlated) with IShares Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dow Jones has no effect on the direction of IShares III i.e., IShares III and IShares Dow go up and down completely randomly.
Pair Corralation between IShares III and IShares Dow
Assuming the 90 days trading horizon IShares III is expected to generate 1.53 times less return on investment than IShares Dow. But when comparing it to its historical volatility, iShares III Public is 1.7 times less risky than IShares Dow. It trades about 0.12 of its potential returns per unit of risk. iShares Dow Jones is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,439 in iShares Dow Jones on September 1, 2024 and sell it today you would earn a total of 646.00 from holding iShares Dow Jones or generate 10.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
iShares III Public vs. iShares Dow Jones
Performance |
| Timeline |
| iShares III Public |
| iShares Dow Jones |
IShares III and IShares Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares III and IShares Dow
The main advantage of trading using opposite IShares III and IShares Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares III position performs unexpectedly, IShares Dow 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 Dow will offset losses from the drop in IShares Dow's long position.| IShares III vs. iShares Core MSCI | IShares III vs. BlackRock ESG Multi Asset | IShares III vs. Pershing Square Holdings | IShares III vs. ASML Holding NV |
| IShares Dow vs. iShares III Public | IShares Dow vs. iShares Core MSCI | IShares Dow vs. iShares France Govt | IShares Dow 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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