Correlation Between IShares Continen and Africa Opportunity

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

By analyzing existing cross correlation between iShares Continen Eurp and Africa Opportunity, you can compare the effects of market volatilities on IShares Continen and Africa Opportunity 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 Continen with a short position of Africa Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Continen and Africa Opportunity.

Diversification Opportunities for IShares Continen and Africa Opportunity

-0.7

Correlation Coefficient

IShares Continen  Africa Opportunity

Excellent diversification

The 3 months correlation between IShares and Africa is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Continen Eurp and Africa Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Opportunity and IShares Continen 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 Continen Eurp are associated (or correlated) with Africa Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Opportunity has no effect on the direction of IShares Continen i.e., IShares Continen and Africa Opportunity go up and down completely randomly.

Pair Corralation between IShares Continen and Africa Opportunity

Assuming the 90 days trading horizon iShares Continen Eurp is expected to generate 0.79 times more return on investment than Africa Opportunity. However, iShares Continen Eurp is 1.27 times less risky than Africa Opportunity. It trades about 0.03 of its potential returns per unit of risk. Africa Opportunity is currently generating about 0.01 per unit of risk. If you would invest  97.00  in iShares Continen Eurp on September 30, 2024 and sell it today you would earn a total of  13.00  from holding iShares Continen Eurp or generate 13.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

iShares Continen Eurp  vs.  Africa Opportunity

iShares Continen Eurp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Africa Opportunity

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Opportunity are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Africa Opportunity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Continen and Africa Opportunity

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

The idea behind iShares Continen Eurp and Africa Opportunity 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.