Correlation Between IShares Continental and HL Multi

Can any of the company-specific risk be diversified away by investing in both IShares Continental and HL Multi 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 Continental and HL Multi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Continental European and HL Multi Index Moderately, you can compare the effects of market volatilities on IShares Continental and HL Multi 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 Continental with a short position of HL Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Continental and HL Multi.

Diversification Opportunities for IShares Continental and HL Multi

-0.41

Correlation Coefficient

IShares Continental  HL Multi

Very good diversification

The 3 months correlation between IShares and 0P0001RI3W is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares Continental European and HL Multi Index Moderately in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HL Multi Index and IShares Continental 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 Continental European are associated (or correlated) with HL Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HL Multi Index has no effect on the direction of IShares Continental i.e., IShares Continental and HL Multi go up and down completely randomly.

Pair Corralation between IShares Continental and HL Multi

Assuming the 90 days trading horizon iShares Continental European is expected to generate 1.24 times more return on investment than HL Multi. However, IShares Continental is 1.24 times more volatile than HL Multi Index Moderately. It trades about -0.06 of its potential returns per unit of risk. HL Multi Index Moderately is currently generating about -0.12 per unit of risk. If you would invest  113.00  in iShares Continental European on October 9, 2024 and sell it today you would lose (1.00) from holding iShares Continental European or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Continental European  vs.  HL Multi Index Moderately

iShares Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Continental European has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, IShares Continental is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

HL Multi Index

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HL Multi Index Moderately are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively invariable forward indicators, HL Multi is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Continental and HL Multi

The main advantage of trading using opposite IShares Continental and HL Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Continental position performs unexpectedly, HL Multi 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 HL Multi will offset losses from the drop in HL Multi's long position.

The idea behind iShares Continental European and HL Multi Index Moderately 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.