Correlation Between IShares International and IShares Morningstar
Can any of the company-specific risk be diversified away by investing in both IShares International and IShares Morningstar 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 International and IShares Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares International Developed and iShares Morningstar Small Cap, you can compare the effects of market volatilities on IShares International and IShares Morningstar 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 International with a short position of IShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and IShares Morningstar.
Diversification Opportunities for IShares International and IShares Morningstar
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Develope and iShares Morningstar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar and IShares International 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 International Developed are associated (or correlated) with IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of IShares International i.e., IShares International and IShares Morningstar go up and down completely randomly.
Pair Corralation between IShares International and IShares Morningstar
Given the investment horizon of 90 days IShares International is expected to generate 1.8 times less return on investment than IShares Morningstar. But when comparing it to its historical volatility, iShares International Developed is 1.36 times less risky than IShares Morningstar. It trades about 0.05 of its potential returns per unit of risk. iShares Morningstar Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,160 in iShares Morningstar Small Cap on September 2, 2024 and sell it today you would earn a total of 1,740 from holding iShares Morningstar Small Cap or generate 33.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Develope vs. iShares Morningstar Small Cap
Performance |
| Timeline |
| iShares International |
| iShares Morningstar |
IShares International and IShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and IShares Morningstar
The main advantage of trading using opposite IShares International and IShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International position performs unexpectedly, IShares Morningstar 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 Morningstar will offset losses from the drop in IShares Morningstar's long position.| IShares International vs. iShares Morningstar Small Cap | IShares International vs. iShares Edge MSCI | IShares International vs. iShares MSCI Intl | IShares International vs. iShares Small Cap |
| IShares Morningstar vs. Vanguard Small Cap Value | IShares Morningstar vs. Dimensional Targeted Value | IShares Morningstar vs. SPDR SP 600 | IShares Morningstar vs. Avantis Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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