Correlation Between IShares France and IShares II
Can any of the company-specific risk be diversified away by investing in both IShares France and IShares II 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 France and IShares II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares France Govt and iShares II Public, you can compare the effects of market volatilities on IShares France and IShares II 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 France with a short position of IShares II. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares France and IShares II.
Diversification Opportunities for IShares France and IShares II
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares France Govt and iShares II Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares II Public and IShares France 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 France Govt are associated (or correlated) with IShares II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares II Public has no effect on the direction of IShares France i.e., IShares France and IShares II go up and down completely randomly.
Pair Corralation between IShares France and IShares II
Assuming the 90 days trading horizon IShares France is expected to generate 1.49 times less return on investment than IShares II. But when comparing it to its historical volatility, iShares France Govt is 1.24 times less risky than IShares II. It trades about 0.06 of its potential returns per unit of risk. iShares II Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 14,780 in iShares II Public on September 12, 2024 and sell it today you would earn a total of 1,586 from holding iShares II Public or generate 10.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares France Govt vs. iShares II Public
Performance |
| Timeline |
| iShares France Govt |
| iShares II Public |
IShares France and IShares II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares France and IShares II
The main advantage of trading using opposite IShares France and IShares II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares France position performs unexpectedly, IShares II 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 II will offset losses from the drop in IShares II's long position.| IShares France vs. iShares III Public | IShares France vs. iShares Core MSCI | IShares France vs. iShares Edge MSCI | IShares France vs. iShares Core FTSE |
| IShares II vs. iShares III Public | IShares II vs. iShares Core MSCI | IShares II vs. iShares France Govt | IShares II 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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