Correlation Between IShares Premium and IShares Global

Can any of the company-specific risk be diversified away by investing in both IShares Premium 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 Premium 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 Premium Money and iShares Global Monthly, you can compare the effects of market volatilities on IShares Premium 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 Premium with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Premium and IShares Global.

Diversification Opportunities for IShares Premium and IShares Global

0.82

Correlation Coefficient

IShares Premium  IShares Global

Very poor diversification

The 3 months correlation between IShares and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Premium Money and iShares Global Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Monthly and IShares Premium 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 Premium Money 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 Monthly has no effect on the direction of IShares Premium i.e., IShares Premium and IShares Global go up and down completely randomly.

Pair Corralation between IShares Premium and IShares Global

Assuming the 90 days trading horizon IShares Premium is expected to generate 5.21 times less return on investment than IShares Global. But when comparing it to its historical volatility, iShares Premium Money is 43.13 times less risky than IShares Global. It trades about 0.99 of its potential returns per unit of risk. iShares Global Monthly is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,154  in iShares Global Monthly on September 2, 2024 and sell it today you would earn a total of  108.00  from holding iShares Global Monthly or generate 5.01% return on investment over 90 days.

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

iShares Premium Money  vs.  iShares Global Monthly

iShares Premium Money

Risk-Adjusted Performance

78 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Premium Money are ranked lower than 78 (%) 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.

iShares Global Monthly

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Monthly are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, IShares Global 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 Premium and IShares Global

The main advantage of trading using opposite IShares Premium and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Premium 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 Premium Money and iShares Global Monthly 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.