Correlation Between IShares JP and IShares Global

Can any of the company-specific risk be diversified away by investing in both IShares JP and IShares Global 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 IShares Global 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 iShares Global Timber, you can compare the effects of market volatilities on IShares JP and IShares Global 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 IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares JP and IShares Global.

Diversification Opportunities for IShares JP and IShares Global

0.64

Correlation Coefficient

IShares JP  IShares Global

Poor diversification

The 3 months correlation between IShares and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Timber has no effect on the direction of IShares JP i.e., IShares JP and IShares Global go up and down completely randomly.

Pair Corralation between IShares JP and IShares Global

Assuming the 90 days trading horizon iShares JP Morgan is expected to generate 0.42 times more return on investment than IShares Global. However, iShares JP Morgan is 2.4 times less risky than IShares Global. It trades about -0.11 of its potential returns per unit of risk. iShares Global Timber is currently generating about -0.24 per unit of risk. If you would invest  8,979  in iShares JP Morgan on September 28, 2024 and sell it today you would lose (240.00) from holding iShares JP Morgan or give up 2.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

iShares JP Morgan  vs.  iShares Global Timber

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.

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with IShares JP and IShares Global

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

The idea behind iShares JP Morgan and iShares Global Timber 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.