Correlation Between IShares Trust and Bayerische Motoren

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

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

Diversification Opportunities for IShares Trust and Bayerische Motoren

0.11

Correlation Coefficient

IShares Trust  Bayerische Motoren

Average diversification

The 3 months correlation between IShares and Bayerische is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and IShares Trust 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 Trust are associated (or correlated) with Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of IShares Trust i.e., IShares Trust and Bayerische Motoren go up and down completely randomly.

Pair Corralation between IShares Trust and Bayerische Motoren

Assuming the 90 days trading horizon IShares Trust is expected to generate 1.77 times less return on investment than Bayerische Motoren. But when comparing it to its historical volatility, iShares Trust is 1.63 times less risky than Bayerische Motoren. It trades about 0.08 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  149,698  in Bayerische Motoren Werke on September 17, 2024 and sell it today you would earn a total of  11,724  from holding Bayerische Motoren Werke or generate 7.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

iShares Trust   vs.  Bayerische Motoren Werke

iShares Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bayerische Motoren Werke

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with IShares Trust and Bayerische Motoren

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

The idea behind iShares Trust and Bayerische Motoren Werke 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.