Correlation Between IShares Global and SmartETFs Smart

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

By analyzing existing cross correlation between iShares Global 100 and SmartETFs Smart Transportation, you can compare the effects of market volatilities on IShares Global and SmartETFs Smart 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 SmartETFs Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and SmartETFs Smart.

Diversification Opportunities for IShares Global and SmartETFs Smart

0.92

Correlation Coefficient

IShares Global  SmartETFs Smart

Almost no diversification

The 3 months correlation between IShares and SmartETFs is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global 100 and SmartETFs Smart Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartETFs Smart Tran 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 100 are associated (or correlated) with SmartETFs Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartETFs Smart Tran has no effect on the direction of IShares Global i.e., IShares Global and SmartETFs Smart go up and down completely randomly.

Pair Corralation between IShares Global and SmartETFs Smart

Considering the 90-day investment horizon iShares Global 100 is expected to generate 0.72 times more return on investment than SmartETFs Smart. However, iShares Global 100 is 1.39 times less risky than SmartETFs Smart. It trades about -0.07 of its potential returns per unit of risk. SmartETFs Smart Transportation is currently generating about -0.06 per unit of risk. If you would invest  10,138  in iShares Global 100 on December 29, 2024 and sell it today you would lose (518.00) from holding iShares Global 100 or give up 5.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

iShares Global 100  vs.  SmartETFs Smart Transportation

iShares Global 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SmartETFs Smart Tran

Risk-Adjusted Performance

Very Weak

Over the last 90 days SmartETFs Smart Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SmartETFs Smart is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and SmartETFs Smart

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

The idea behind iShares Global 100 and SmartETFs Smart Transportation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.