Correlation Between IShares Asia and IShares UK

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

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

Diversification Opportunities for IShares Asia and IShares UK

0.46

Correlation Coefficient

IShares Asia  IShares UK

Very weak diversification

The 3 months correlation between IShares and IShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia Property and iShares UK Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares UK Property and IShares Asia 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 Asia Property are associated (or correlated) with IShares UK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares UK Property has no effect on the direction of IShares Asia i.e., IShares Asia and IShares UK go up and down completely randomly.

Pair Corralation between IShares Asia and IShares UK

Assuming the 90 days trading horizon iShares Asia Property is expected to generate 0.89 times more return on investment than IShares UK. However, iShares Asia Property is 1.12 times less risky than IShares UK. It trades about 0.13 of its potential returns per unit of risk. iShares UK Property is currently generating about 0.05 per unit of risk. If you would invest  1,833  in iShares Asia Property on December 24, 2024 and sell it today you would earn a total of  130.00  from holding iShares Asia Property or generate 7.09% return on investment over 90 days.

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

iShares Asia Property  vs.  iShares UK Property

iShares Asia Property

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Asia Property are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares UK Property

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares UK Property are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares UK is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Asia and IShares UK

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

The idea behind iShares Asia Property and iShares UK Property 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.