Correlation Between IShares SP and IShares Asia
Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares Asia 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 SP and IShares Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and iShares Asia Pacific, you can compare the effects of market volatilities on IShares SP and IShares Asia 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 SP with a short position of IShares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares Asia.
Diversification Opportunities for IShares SP and IShares Asia
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShares Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Asia Pacific and IShares SP 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 SP 500 are associated (or correlated) with IShares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Asia Pacific has no effect on the direction of IShares SP i.e., IShares SP and IShares Asia go up and down completely randomly.
Pair Corralation between IShares SP and IShares Asia
Assuming the 90 days trading horizon iShares SP 500 is expected to generate 1.38 times more return on investment than IShares Asia. However, IShares SP is 1.38 times more volatile than iShares Asia Pacific. It trades about 0.24 of its potential returns per unit of risk. iShares Asia Pacific is currently generating about 0.11 per unit of risk. If you would invest 5,368 in iShares SP 500 on August 28, 2024 and sell it today you would earn a total of 330.00 from holding iShares SP 500 or generate 6.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. iShares Asia Pacific
Performance |
| Timeline |
| iShares SP 500 |
| iShares Asia Pacific |
IShares SP and IShares Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares Asia
The main advantage of trading using opposite IShares SP and IShares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares Asia 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 Asia will offset losses from the drop in IShares Asia's long position.| IShares SP vs. SPDR Dow Jones | IShares SP vs. iShares China CNY | IShares SP vs. iShares Core MSCI | IShares SP vs. iShares MSCI EM |
| IShares Asia vs. SPDR Dow Jones | IShares Asia vs. iShares SP 500 | IShares Asia vs. iShares China CNY | IShares Asia vs. iShares Core 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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