Correlation Between IShareso Government and IShares AEX

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

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

Diversification Opportunities for IShareso Government and IShares AEX

-0.25

Correlation Coefficient

IShareso Government  IShares AEX

Very good diversification

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

Pair Corralation between IShareso Government and IShares AEX

Assuming the 90 days trading horizon iShareso Government Bond is expected to generate 0.11 times more return on investment than IShares AEX. However, iShareso Government Bond is 9.33 times less risky than IShares AEX. It trades about 0.19 of its potential returns per unit of risk. iShares AEX UCITS is currently generating about 0.01 per unit of risk. If you would invest  14,096  in iShareso Government Bond on September 12, 2024 and sell it today you would earn a total of  145.00  from holding iShareso Government Bond or generate 1.03% return on investment over 90 days.

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

iShareso Government Bond  vs.  iShares AEX UCITS

iShareso Government Bond

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShareso Government Bond are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShareso Government is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares AEX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShareso Government and IShares AEX

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

The idea behind iShareso Government Bond and iShares AEX UCITS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.