Correlation Between IShares JP and BSDE

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

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

Diversification Opportunities for IShares JP and BSDE

-0.15

Correlation Coefficient

IShares JP  BSDE

Good diversification

The 3 months correlation between IShares and BSDE is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and BSDE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSDE and IShares JP 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 JP Morgan are associated (or correlated) with BSDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSDE has no effect on the direction of IShares JP i.e., IShares JP and BSDE go up and down completely randomly.

Pair Corralation between IShares JP and BSDE

Considering the 90-day investment horizon IShares JP is expected to generate 395.78 times less return on investment than BSDE. But when comparing it to its historical volatility, iShares JP Morgan is 192.67 times less risky than BSDE. It trades about 0.05 of its potential returns per unit of risk. BSDE is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,391  in BSDE on October 22, 2024 and sell it today you would earn a total of  107,109  from holding BSDE or generate 4479.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	19.35%
Values	Daily Returns

iShares JP Morgan  vs.  BSDE

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, IShares JP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BSDE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BSDE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BSDE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares JP and BSDE

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

The idea behind iShares JP Morgan and BSDE 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.