Correlation Between IShares Global and IShares India

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

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

Diversification Opportunities for IShares Global and IShares India

-0.56

Correlation Coefficient

IShares Global  IShares India

Excellent diversification

The 3 months correlation between IShares and IShares is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Real and iShares India Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares India Index and IShares Global 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 Global Real are associated (or correlated) with IShares India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares India Index has no effect on the direction of IShares Global i.e., IShares Global and IShares India go up and down completely randomly.

Pair Corralation between IShares Global and IShares India

Assuming the 90 days trading horizon iShares Global Real is expected to generate 1.18 times more return on investment than IShares India. However, IShares Global is 1.18 times more volatile than iShares India Index. It trades about 0.04 of its potential returns per unit of risk. iShares India Index is currently generating about -0.01 per unit of risk. If you would invest  2,997  in iShares Global Real on December 30, 2024 and sell it today you would earn a total of  65.00  from holding iShares Global Real or generate 2.17% return on investment over 90 days.

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

iShares Global Real  vs.  iShares India Index

iShares Global Real

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Real are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares India Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares India Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares India is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and IShares India

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

The idea behind iShares Global Real and iShares India 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.