Correlation Between IShares JP and Vanguard EUR

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

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

Diversification Opportunities for IShares JP and Vanguard EUR

0.68

Correlation Coefficient

IShares JP  Vanguard EUR

Poor diversification

The 3 months correlation between IShares and Vanguard is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and Vanguard EUR Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard EUR Eurozone and IShares JP 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 JP Morgan are associated (or correlated) with Vanguard EUR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard EUR Eurozone has no effect on the direction of IShares JP i.e., IShares JP and Vanguard EUR go up and down completely randomly.

Pair Corralation between IShares JP and Vanguard EUR

Assuming the 90 days trading horizon iShares JP Morgan is expected to generate 0.86 times more return on investment than Vanguard EUR. However, iShares JP Morgan is 1.17 times less risky than Vanguard EUR. It trades about 0.08 of its potential returns per unit of risk. Vanguard EUR Eurozone is currently generating about 0.02 per unit of risk. If you would invest  8,142  in iShares JP Morgan on October 7, 2024 and sell it today you would earn a total of  643.00  from holding iShares JP Morgan or generate 7.9% return on investment over 90 days.

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

iShares JP Morgan  vs.  Vanguard EUR Eurozone

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares JP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard EUR Eurozone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard EUR Eurozone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard EUR is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares JP and Vanguard EUR

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

The idea behind iShares JP Morgan and Vanguard EUR Eurozone 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.