Correlation Between IShares Select and IShares International

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

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

Diversification Opportunities for IShares Select and IShares International

-0.63

Correlation Coefficient

IShares Select  IShares International

Excellent diversification

The 3 months correlation between IShares and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and IShares Select 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 Select Dividend are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of IShares Select i.e., IShares Select and IShares International go up and down completely randomly.

Pair Corralation between IShares Select and IShares International

Considering the 90-day investment horizon iShares Select Dividend is expected to generate 0.89 times more return on investment than IShares International. However, iShares Select Dividend is 1.12 times less risky than IShares International. It trades about 0.11 of its potential returns per unit of risk. iShares International Select is currently generating about -0.04 per unit of risk. If you would invest  13,065  in iShares Select Dividend on September 12, 2024 and sell it today you would earn a total of  666.50  from holding iShares Select Dividend or generate 5.1% return on investment over 90 days.

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

iShares Select Dividend  vs.  iShares International Select

iShares Select Dividend

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Select is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares International Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, IShares International is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Select and IShares International

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

The idea behind iShares Select Dividend and iShares International Select 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.

Check out your portfolio center.

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.