Correlation Between IShares AsiaPacific and Vident International

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

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

Diversification Opportunities for IShares AsiaPacific and Vident International

0.77

Correlation Coefficient

IShares AsiaPacific  Vident International

Poor diversification

The 3 months correlation between IShares and Vident is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares AsiaPacific Dividend and Vident International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident International and IShares AsiaPacific 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 AsiaPacific Dividend are associated (or correlated) with Vident International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident International has no effect on the direction of IShares AsiaPacific i.e., IShares AsiaPacific and Vident International go up and down completely randomly.

Pair Corralation between IShares AsiaPacific and Vident International

Given the investment horizon of 90 days IShares AsiaPacific is expected to generate 6.64 times less return on investment than Vident International. But when comparing it to its historical volatility, iShares AsiaPacific Dividend is 1.17 times less risky than Vident International. It trades about 0.02 of its potential returns per unit of risk. Vident International Equity is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,505  in Vident International Equity on December 28, 2024 and sell it today you would earn a total of  116.50  from holding Vident International Equity or generate 4.65% return on investment over 90 days.

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

iShares AsiaPacific Dividend  vs.  Vident International Equity

iShares AsiaPacific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares AsiaPacific Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vident International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vident International Equity are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Vident International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares AsiaPacific and Vident International

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

The idea behind iShares AsiaPacific Dividend and Vident International Equity 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.