Correlation Between IShares International and IShares Intl

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

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

Diversification Opportunities for IShares International and IShares Intl

0.6

Correlation Coefficient

IShares International  IShares Intl

Poor diversification

The 3 months correlation between IShares and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares International High and iShares Intl High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Intl High and IShares International 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 International High are associated (or correlated) with IShares Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Intl High has no effect on the direction of IShares International i.e., IShares International and IShares Intl go up and down completely randomly.

Pair Corralation between IShares International and IShares Intl

Given the investment horizon of 90 days IShares International is expected to generate 14.41 times less return on investment than IShares Intl. In addition to that, IShares International is 2.19 times more volatile than iShares Intl High. It trades about 0.01 of its total potential returns per unit of risk. iShares Intl High is currently generating about 0.2 per unit of volatility. If you would invest  4,445  in iShares Intl High on September 13, 2024 and sell it today you would earn a total of  39.00  from holding iShares Intl High or generate 0.88% return on investment over 90 days.

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

iShares International High  vs.  iShares Intl High

iShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares International High has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares International is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with IShares International and IShares Intl

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

The idea behind iShares International High and iShares Intl High 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.