Correlation Between IShares Core and LG DAX
Can any of the company-specific risk be diversified away by investing in both IShares Core and LG DAX 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 Core and LG DAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and LG DAX Daily, you can compare the effects of market volatilities on IShares Core and LG DAX 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 Core with a short position of LG DAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and LG DAX.
Diversification Opportunities for IShares Core and LG DAX
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and DES2 is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and LG DAX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG DAX Daily and IShares Core 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 Core SP are associated (or correlated) with LG DAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG DAX Daily has no effect on the direction of IShares Core i.e., IShares Core and LG DAX go up and down completely randomly.
Pair Corralation between IShares Core and LG DAX
Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.8 times more return on investment than LG DAX. However, iShares Core SP is 1.25 times less risky than LG DAX. It trades about 0.22 of its potential returns per unit of risk. LG DAX Daily is currently generating about 0.1 per unit of risk. If you would invest 57,074 in iShares Core SP on August 27, 2024 and sell it today you would earn a total of 3,374 from holding iShares Core SP or generate 5.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. LG DAX Daily
Performance |
| Timeline |
| iShares Core SP |
| LG DAX Daily |
IShares Core and LG DAX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and LG DAX
The main advantage of trading using opposite IShares Core and LG DAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, LG DAX 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 LG DAX will offset losses from the drop in LG DAX's long position.The idea behind iShares Core SP and LG DAX Daily 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.| LG DAX vs. LG DAX Daily | LG DAX vs. iShares Govt Bond | LG DAX vs. Amundi MSCI Europe | LG DAX vs. iShares Global AAA AA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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