Correlation Between IShares Infrastructure and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares Infrastructure and IShares Global 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 Infrastructure and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Infrastructure ETF and iShares Global Infrastructure, you can compare the effects of market volatilities on IShares Infrastructure and IShares Global 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 Infrastructure with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Infrastructure and IShares Global.
Diversification Opportunities for IShares Infrastructure and IShares Global
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Infrastructure ETF and iShares Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Infra and IShares Infrastructure 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 Infrastructure ETF are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Infra has no effect on the direction of IShares Infrastructure i.e., IShares Infrastructure and IShares Global go up and down completely randomly.
Pair Corralation between IShares Infrastructure and IShares Global
Given the investment horizon of 90 days iShares Infrastructure ETF is expected to generate 1.28 times more return on investment than IShares Global. However, IShares Infrastructure is 1.28 times more volatile than iShares Global Infrastructure. It trades about 0.07 of its potential returns per unit of risk. iShares Global Infrastructure is currently generating about 0.06 per unit of risk. If you would invest 3,596 in iShares Infrastructure ETF on August 26, 2024 and sell it today you would earn a total of 1,526 from holding iShares Infrastructure ETF or generate 42.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Infrastructure ETF vs. iShares Global Infrastructure
Performance |
| Timeline |
| iShares Infrastructure |
| iShares Global Infra |
IShares Infrastructure and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Infrastructure and IShares Global
The main advantage of trading using opposite IShares Infrastructure and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Infrastructure position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.The idea behind iShares Infrastructure ETF and iShares Global Infrastructure pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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