Correlation Between IShares Trust and IShares Ibovespa

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

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

Diversification Opportunities for IShares Trust and IShares Ibovespa

-0.48

Correlation Coefficient

IShares Trust  IShares Ibovespa

Very good diversification

The 3 months correlation between IShares and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares Ibovespa Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ibovespa Index and IShares Trust 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 Trust are associated (or correlated) with IShares Ibovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ibovespa Index has no effect on the direction of IShares Trust i.e., IShares Trust and IShares Ibovespa go up and down completely randomly.

Pair Corralation between IShares Trust and IShares Ibovespa

Assuming the 90 days trading horizon iShares Trust is expected to generate 1.12 times more return on investment than IShares Ibovespa. However, IShares Trust is 1.12 times more volatile than iShares Ibovespa Index. It trades about -0.11 of its potential returns per unit of risk. iShares Ibovespa Index is currently generating about -0.3 per unit of risk. If you would invest  9,794  in iShares Trust on October 6, 2024 and sell it today you would lose (280.00) from holding iShares Trust or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

iShares Trust   vs.  iShares Ibovespa Index

iShares Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Ibovespa Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Ibovespa Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Trust and IShares Ibovespa

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

The idea behind iShares Trust and iShares Ibovespa Index 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.