Correlation Between IShares Global and IShares Premium

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

By analyzing existing cross correlation between iShares Global Infrastructure and iShares Premium Money, you can compare the effects of market volatilities on IShares Global and IShares Premium 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 Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and IShares Premium.

Diversification Opportunities for IShares Global and IShares Premium

-0.74

Correlation Coefficient

IShares Global  IShares Premium

Pay attention - limited upside

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

Pair Corralation between IShares Global and IShares Premium

Assuming the 90 days trading horizon iShares Global Infrastructure is expected to under-perform the IShares Premium. In addition to that, IShares Global is 65.39 times more volatile than iShares Premium Money. It trades about -0.03 of its total potential returns per unit of risk. iShares Premium Money is currently generating about 0.77 per unit of volatility. If you would invest  4,964  in iShares Premium Money on December 30, 2024 and sell it today you would earn a total of  39.00  from holding iShares Premium Money or generate 0.79% return on investment over 90 days.

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

iShares Global Infrastructure  vs.  iShares Premium Money

iShares Global Infra

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental 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 Premium Money

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Premium Money are ranked lower than 60 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Premium 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 Premium

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

The idea behind iShares Global Infrastructure and iShares Premium Money 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.