Correlation Between Russell Australian and IShares Asia
Can any of the company-specific risk be diversified away by investing in both Russell Australian 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 Russell Australian and IShares Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell Australian Government and iShares Asia 50, you can compare the effects of market volatilities on Russell Australian 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 Russell Australian with a short position of IShares Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell Australian and IShares Asia.
Diversification Opportunities for Russell Australian and IShares Asia
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Russell and IShares is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Russell Australian Government 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 Russell Australian 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 Russell Australian Government 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 Russell Australian i.e., Russell Australian and IShares Asia go up and down completely randomly.
Pair Corralation between Russell Australian and IShares Asia
Assuming the 90 days trading horizon Russell Australian is expected to generate 1.43 times less return on investment than IShares Asia. But when comparing it to its historical volatility, Russell Australian Government is 3.03 times less risky than IShares Asia. It trades about 0.4 of its potential returns per unit of risk. iShares Asia 50 is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 10,642 in iShares Asia 50 on September 18, 2024 and sell it today you would earn a total of 371.00 from holding iShares Asia 50 or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell Australian Government vs. iShares Asia 50
Performance |
| Timeline |
| Russell Australian |
| iShares Asia 50 |
Russell Australian and IShares Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell Australian and IShares Asia
The main advantage of trading using opposite Russell Australian and IShares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell Australian 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.| Russell Australian vs. VanEck Global Listed | Russell Australian vs. BetaShares Crypto Innovators | Russell Australian vs. BetaShares Global Government | Russell Australian vs. BetaShares Geared Australian |
| IShares Asia vs. ETFS Morningstar Global | IShares Asia vs. BetaShares Geared Equity | IShares Asia vs. VanEck Vectors Australian | IShares Asia vs. SPDR SPASX 200 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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