Correlation Between IShares Intl and IShares JP

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

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

Diversification Opportunities for IShares Intl and IShares JP

0.25

Correlation Coefficient

IShares Intl  IShares JP

Modest diversification

The 3 months correlation between IShares and IShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intl High and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and IShares Intl 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 Intl High are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of IShares Intl i.e., IShares Intl and IShares JP go up and down completely randomly.

Pair Corralation between IShares Intl and IShares JP

Given the investment horizon of 90 days IShares Intl is expected to generate 5.27 times less return on investment than IShares JP. But when comparing it to its historical volatility, iShares Intl High is 1.28 times less risky than IShares JP. It trades about 0.04 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,779  in iShares JP Morgan on September 13, 2024 and sell it today you would earn a total of  116.00  from holding iShares JP Morgan or generate 3.07% return on investment over 90 days.

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

iShares Intl High  vs.  iShares JP Morgan

iShares Intl High

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Intl High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Intl is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares JP Morgan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, IShares JP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Intl and IShares JP

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

The idea behind iShares Intl High and iShares JP Morgan 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.