Correlation Between IShares European and IShares UK
Can any of the company-specific risk be diversified away by investing in both IShares European and IShares UK 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 European and IShares UK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares European Property and iShares UK Property, you can compare the effects of market volatilities on IShares European and IShares UK 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 European with a short position of IShares UK. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares European and IShares UK.
Diversification Opportunities for IShares European and IShares UK
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares European Property and iShares UK Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares UK Property and IShares European 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 European Property are associated (or correlated) with IShares UK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares UK Property has no effect on the direction of IShares European i.e., IShares European and IShares UK go up and down completely randomly.
Pair Corralation between IShares European and IShares UK
Assuming the 90 days trading horizon iShares European Property is expected to generate 1.28 times more return on investment than IShares UK. However, IShares European is 1.28 times more volatile than iShares UK Property. It trades about -0.14 of its potential returns per unit of risk. iShares UK Property is currently generating about -0.27 per unit of risk. If you would invest 2,782 in iShares European Property on October 7, 2024 and sell it today you would lose (78.00) from holding iShares European Property or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares European Property vs. iShares UK Property
Performance |
| Timeline |
| iShares European Property |
| iShares UK Property |
IShares European and IShares UK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares European and IShares UK
The main advantage of trading using opposite IShares European and IShares UK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares European position performs unexpectedly, IShares UK 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 UK will offset losses from the drop in IShares UK's long position.| IShares European vs. iShares Corp Bond | IShares European vs. iShares Emerging Asia | IShares European vs. iShares MSCI Global | IShares European vs. iShares Asia Property |
| IShares UK vs. iShares Corp Bond | IShares UK vs. iShares Emerging Asia | IShares UK vs. iShares MSCI Global | IShares UK vs. iShares Asia Property |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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