Correlation Between IShares Regional and IShares IShares

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

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

Diversification Opportunities for IShares Regional and IShares IShares

0.62

Correlation Coefficient

IShares Regional  IShares IShares

Poor diversification

The 3 months correlation between IShares and IShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Regional Banks and iShares iShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iShares and IShares Regional 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 Regional Banks are associated (or correlated) with IShares IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iShares has no effect on the direction of IShares Regional i.e., IShares Regional and IShares IShares go up and down completely randomly.

Pair Corralation between IShares Regional and IShares IShares

Assuming the 90 days trading horizon iShares Regional Banks is expected to generate 0.26 times more return on investment than IShares IShares. However, iShares Regional Banks is 3.85 times less risky than IShares IShares. It trades about -0.05 of its potential returns per unit of risk. iShares iShares is currently generating about -0.08 per unit of risk. If you would invest  108,386  in iShares Regional Banks on October 8, 2024 and sell it today you would lose (294.00) from holding iShares Regional Banks or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

iShares Regional Banks  vs.  iShares iShares

iShares Regional Banks

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Regional Banks are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Regional showed solid returns over the last few months and may actually be approaching a breakup point.

iShares iShares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iShares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, IShares IShares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with IShares Regional and IShares IShares

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

The idea behind iShares Regional Banks and iShares iShares 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.