Correlation Between IShares Global and IShares Equal

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

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

Diversification Opportunities for IShares Global and IShares Equal

-0.1

Correlation Coefficient

IShares Global  IShares Equal

Good diversification

The 3 months correlation between IShares and IShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Monthly and iShares Equal Weight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equal Weight 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 Monthly are associated (or correlated) with IShares Equal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equal Weight has no effect on the direction of IShares Global i.e., IShares Global and IShares Equal go up and down completely randomly.

Pair Corralation between IShares Global and IShares Equal

Assuming the 90 days trading horizon iShares Global Monthly is expected to generate 0.84 times more return on investment than IShares Equal. However, iShares Global Monthly is 1.2 times less risky than IShares Equal. It trades about 0.14 of its potential returns per unit of risk. iShares Equal Weight is currently generating about -0.01 per unit of risk. If you would invest  2,118  in iShares Global Monthly on December 30, 2024 and sell it today you would earn a total of  123.00  from holding iShares Global Monthly or generate 5.81% return on investment over 90 days.

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

iShares Global Monthly  vs.  iShares Equal Weight

iShares Global Monthly

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Monthly are ranked lower than 11 (%) 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.

iShares Equal Weight

Risk-Adjusted Performance

Very Weak

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

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

The idea behind iShares Global Monthly and iShares Equal Weight 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.