Correlation Between IShares Core and IShares Currency

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

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

Diversification Opportunities for IShares Core and IShares Currency

0.99

Correlation Coefficient

IShares Core  IShares Currency

No risk reduction

The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged and IShares Core 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 Core MSCI are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of IShares Core i.e., IShares Core and IShares Currency go up and down completely randomly.

Pair Corralation between IShares Core and IShares Currency

Given the investment horizon of 90 days IShares Core is expected to generate 1.17 times less return on investment than IShares Currency. In addition to that, IShares Core is 1.0 times more volatile than iShares Currency Hedged. It trades about 0.06 of its total potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.07 per unit of volatility. If you would invest  2,704  in iShares Currency Hedged on December 29, 2024 and sell it today you would earn a total of  109.00  from holding iShares Currency Hedged or generate 4.03% return on investment over 90 days.

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

iShares Core MSCI  vs.  iShares Currency Hedged

iShares Core MSCI

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Currency Hedged

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares Currency is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and IShares Currency

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

The idea behind iShares Core MSCI and iShares Currency Hedged 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.