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

0.49

Correlation Coefficient

IShares AsiaPacific  Vident International

Very weak diversification

The 3 months correlation between IShares and Vident is 0.49. 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 1.29 times less return on investment than Vident International. In addition to that, IShares AsiaPacific is 1.02 times more volatile than Vident International Equity. It trades about 0.05 of its total potential returns per unit of risk. Vident International Equity is currently generating about 0.07 per unit of volatility. If you would invest  1,980  in Vident International Equity on December 4, 2024 and sell it today you would earn a total of  592.00  from holding Vident International Equity or generate 29.9% return on investment over 90 days.

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

iShares AsiaPacific Dividend  vs.  Vident International Equity

iShares AsiaPacific

Risk-Adjusted Performance

Very Weak

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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vident International Equity are ranked lower than 2 (%) 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.