Correlation Between IShares Core and IShares Global

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

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

Diversification Opportunities for IShares Core and IShares Global

0.69

Correlation Coefficient

IShares Core  IShares Global

Poor diversification

The 3 months correlation between IShares and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Cash and iShares Global Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Healthcare 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 Cash 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 Healthcare has no effect on the direction of IShares Core i.e., IShares Core and IShares Global go up and down completely randomly.

Pair Corralation between IShares Core and IShares Global

Assuming the 90 days trading horizon IShares Core is expected to generate 4.45 times less return on investment than IShares Global. But when comparing it to its historical volatility, iShares Core Cash is 31.93 times less risky than IShares Global. It trades about 0.68 of its potential returns per unit of risk. iShares Global Healthcare is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14,007  in iShares Global Healthcare on December 1, 2024 and sell it today you would earn a total of  677.00  from holding iShares Global Healthcare or generate 4.83% return on investment over 90 days.

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

iShares Core Cash  vs.  iShares Global Healthcare

iShares Core Cash

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Cash are ranked lower than 53 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Global Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Healthcare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking 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 IShares Core and IShares Global

The main advantage of trading using opposite IShares Core and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core Cash and iShares Global Healthcare 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.