Correlation Between IShares Dividend and IShares Global

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

Diversification Opportunities for IShares Dividend and IShares Global

0.79

Correlation Coefficient

IShares Dividend  IShares Global

Poor diversification

The 3 months correlation between IShares and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Dividend Growers 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 Dividend 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 Dividend Growers 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 Dividend i.e., IShares Dividend and IShares Global go up and down completely randomly.

Pair Corralation between IShares Dividend and IShares Global

Assuming the 90 days trading horizon iShares Dividend Growers is expected to under-perform the IShares Global. In addition to that, IShares Dividend is 1.17 times more volatile than iShares Global Monthly. It trades about -0.11 of its total potential returns per unit of risk. iShares Global Monthly is currently generating about 0.01 per unit of volatility. If you would invest  2,238  in iShares Global Monthly on November 29, 2024 and sell it today you would earn a total of  4.00  from holding iShares Global Monthly or generate 0.18% return on investment over 90 days.

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

iShares Dividend Growers  vs.  iShares Global Monthly

iShares Dividend Growers

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Dividend Growers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares Dividend 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

Very Weak

Over the last 90 days iShares Global Monthly has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Dividend and IShares Global

The main advantage of trading using opposite IShares Dividend and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Dividend 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 Dividend Growers 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.