Correlation Between IShares Global and IShares Asia

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Can any of the company-specific risk be diversified away by investing in both IShares Global 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 Global 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 Global Consumer and iShares Asia 50, you can compare the effects of market volatilities on IShares Global 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 Global with a short position of IShares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and IShares Asia.

Diversification Opportunities for IShares Global and IShares Asia

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between IShares and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Consumer and iShares Asia 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Asia 50 and IShares Global 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 Global Consumer 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 50 has no effect on the direction of IShares Global i.e., IShares Global and IShares Asia go up and down completely randomly.

Pair Corralation between IShares Global and IShares Asia

Assuming the 90 days trading horizon IShares Global is expected to generate 3.55 times less return on investment than IShares Asia. But when comparing it to its historical volatility, iShares Global Consumer is 1.88 times less risky than IShares Asia. It trades about 0.05 of its potential returns per unit of risk. iShares Asia 50 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,760  in iShares Asia 50 on August 25, 2024 and sell it today you would earn a total of  1,835  from holding iShares Asia 50 or generate 20.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

iShares Global Consumer  vs.  iShares Asia 50

 Performance 
       Timeline  
iShares Global Consumer 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
iShares Asia 50 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Asia 50 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

IShares Global and IShares Asia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Global and IShares Asia

The main advantage of trading using opposite IShares Global and IShares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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.
The idea behind iShares Global Consumer and iShares Asia 50 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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