Correlation Between Avantis Emerging and IShares Global

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

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

Diversification Opportunities for Avantis Emerging and IShares Global

0.74

Correlation Coefficient

Avantis Emerging  IShares Global

Poor diversification

The 3 months correlation between Avantis and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and iShares Global REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global REIT and Avantis Emerging 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 Avantis Emerging Markets are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global REIT has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and IShares Global go up and down completely randomly.

Pair Corralation between Avantis Emerging and IShares Global

Given the investment horizon of 90 days Avantis Emerging Markets is expected to under-perform the IShares Global. But the etf apears to be less risky and, when comparing its historical volatility, Avantis Emerging Markets is 1.25 times less risky than IShares Global. The etf trades about -0.08 of its potential returns per unit of risk. The iShares Global REIT is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,533  in iShares Global REIT on December 4, 2024 and sell it today you would lose (26.00) from holding iShares Global REIT or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Avantis Emerging Markets  vs.  iShares Global REIT

Avantis Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Global REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental 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.

Pair Trading with Avantis Emerging and IShares Global

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

The idea behind Avantis Emerging Markets and iShares Global REIT 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..