Correlation Between IShares Emerging and Avantis Emerging

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

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

Diversification Opportunities for IShares Emerging and Avantis Emerging

0.92

Correlation Coefficient

IShares Emerging  Avantis Emerging

Almost no diversification

The 3 months correlation between IShares and Avantis is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emerging Markets and Avantis Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Emerging Markets and IShares Emerging 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 Emerging Markets are associated (or correlated) with Avantis Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Emerging Markets has no effect on the direction of IShares Emerging i.e., IShares Emerging and Avantis Emerging go up and down completely randomly.

Pair Corralation between IShares Emerging and Avantis Emerging

Given the investment horizon of 90 days iShares Emerging Markets is expected to generate 1.15 times more return on investment than Avantis Emerging. However, IShares Emerging is 1.15 times more volatile than Avantis Emerging Markets. It trades about 0.09 of its potential returns per unit of risk. Avantis Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest  2,649  in iShares Emerging Markets on September 13, 2024 and sell it today you would earn a total of  182.00  from holding iShares Emerging Markets or generate 6.87% return on investment over 90 days.

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

iShares Emerging Markets  vs.  Avantis Emerging Markets

iShares Emerging Markets

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IShares Emerging may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Avantis Emerging Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Emerging and Avantis Emerging

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

The idea behind iShares Emerging Markets and Avantis Emerging Markets 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.