Correlation Between IShares Emerging and ALPS Emerging

Can any of the company-specific risk be diversified away by investing in both IShares Emerging and ALPS 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 ALPS 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 ALPS Emerging Sector, you can compare the effects of market volatilities on IShares Emerging and ALPS 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 ALPS Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Emerging and ALPS Emerging.

Diversification Opportunities for IShares Emerging and ALPS Emerging

0.95

Correlation Coefficient

IShares Emerging  ALPS Emerging

Almost no diversification

The 3 months correlation between IShares and ALPS is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emerging Markets and ALPS Emerging Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Emerging Sector 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 ALPS Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Emerging Sector has no effect on the direction of IShares Emerging i.e., IShares Emerging and ALPS Emerging go up and down completely randomly.

Pair Corralation between IShares Emerging and ALPS Emerging

Given the investment horizon of 90 days iShares Emerging Markets is expected to generate 1.14 times more return on investment than ALPS Emerging. However, IShares Emerging is 1.14 times more volatile than ALPS Emerging Sector. It trades about 0.03 of its potential returns per unit of risk. ALPS Emerging Sector is currently generating about 0.0 per unit of risk. If you would invest  2,595  in iShares Emerging Markets on December 2, 2024 and sell it today you would earn a total of  40.00  from holding iShares Emerging Markets or generate 1.54% 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.  ALPS Emerging Sector

iShares Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Markets are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Emerging is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ALPS Emerging Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPS Emerging Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALPS Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Emerging and ALPS Emerging

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

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