Correlation Between IShares Emerging and IShares International

Can any of the company-specific risk be diversified away by investing in both IShares Emerging 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 Emerging 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 Emerging Markets and iShares International Select, you can compare the effects of market volatilities on IShares Emerging 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 Emerging with a short position of IShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Emerging and IShares International.

Diversification Opportunities for IShares Emerging and IShares International

0.94

Correlation Coefficient

IShares Emerging  IShares International

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emerging Markets 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 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 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 Emerging i.e., IShares Emerging and IShares International go up and down completely randomly.

Pair Corralation between IShares Emerging and IShares International

Given the investment horizon of 90 days IShares Emerging is expected to generate 2.06 times less return on investment than IShares International. In addition to that, IShares Emerging is 1.11 times more volatile than iShares International Select. It trades about 0.14 of its total potential returns per unit of risk. iShares International Select is currently generating about 0.32 per unit of volatility. If you would invest  2,732  in iShares International Select on December 26, 2024 and sell it today you would earn a total of  406.00  from holding iShares International Select or generate 14.86% 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.  iShares International Select

iShares Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Markets are ranked lower than 11 (%) 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 April 2025.

iShares International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Select are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, IShares International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Emerging and IShares International

The main advantage of trading using opposite IShares Emerging and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Emerging 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 Emerging Markets 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.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.