Correlation Between IShares Europe and IShares Latin
Can any of the company-specific risk be diversified away by investing in both IShares Europe and IShares Latin 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 Europe and IShares Latin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Europe ETF and iShares Latin America, you can compare the effects of market volatilities on IShares Europe and IShares Latin 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 Europe with a short position of IShares Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Europe and IShares Latin.
Diversification Opportunities for IShares Europe and IShares Latin
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Europe ETF and iShares Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Latin America and IShares Europe 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 Europe ETF are associated (or correlated) with IShares Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Latin America has no effect on the direction of IShares Europe i.e., IShares Europe and IShares Latin go up and down completely randomly.
Pair Corralation between IShares Europe and IShares Latin
Considering the 90-day investment horizon iShares Europe ETF is expected to under-perform the IShares Latin. But the etf apears to be less risky and, when comparing its historical volatility, iShares Europe ETF is 1.04 times less risky than IShares Latin. The etf trades about -0.29 of its potential returns per unit of risk. The iShares Latin America is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest 2,539 in iShares Latin America on August 28, 2024 and sell it today you would lose (119.00) from holding iShares Latin America or give up 4.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Europe ETF vs. iShares Latin America
Performance |
| Timeline |
| iShares Europe ETF |
| iShares Latin America |
IShares Europe and IShares Latin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Europe and IShares Latin
The main advantage of trading using opposite IShares Europe and IShares Latin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Europe position performs unexpectedly, IShares Latin 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 Latin will offset losses from the drop in IShares Latin's long position.| IShares Europe vs. WisdomTree International Hedged | IShares Europe vs. WisdomTree Emerging Markets | IShares Europe vs. WisdomTree Dynamic Currency |
| IShares Latin vs. iShares China Large Cap | IShares Latin vs. iShares MSCI Mexico | IShares Latin vs. iShares MSCI South | IShares Latin vs. iShares MSCI Japan |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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