Correlation Between IShares Global and IShares Trust

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

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

Diversification Opportunities for IShares Global and IShares Trust

-0.88

Correlation Coefficient

IShares Global  IShares Trust

Pay attention - limited upside

The 3 months correlation between IShares and IShares is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Clean and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and IShares Global 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 Global Clean are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of IShares Global i.e., IShares Global and IShares Trust go up and down completely randomly.

Pair Corralation between IShares Global and IShares Trust

Assuming the 90 days trading horizon iShares Global Clean is expected to under-perform the IShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Clean is 1.01 times less risky than IShares Trust. The etf trades about -0.12 of its potential returns per unit of risk. The iShares Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  288,790  in iShares Trust on August 31, 2024 and sell it today you would earn a total of  41,210  from holding iShares Trust or generate 14.27% return on investment over 90 days.

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

iShares Global Clean  vs.  iShares Trust

iShares Global Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

iShares Trust

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with IShares Global and IShares Trust

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

The idea behind iShares Global Clean and iShares Trust 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.