Correlation Between IShares European and IShares Swiss

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

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

Diversification Opportunities for IShares European and IShares Swiss

0.34

Correlation Coefficient

IShares European  IShares Swiss

Weak diversification

The 3 months correlation between IShares and IShares is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares European Property and iShares Swiss Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Swiss Dividend and IShares European 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 European Property are associated (or correlated) with IShares Swiss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Swiss Dividend has no effect on the direction of IShares European i.e., IShares European and IShares Swiss go up and down completely randomly.

Pair Corralation between IShares European and IShares Swiss

Assuming the 90 days trading horizon IShares European is expected to generate 6.94 times less return on investment than IShares Swiss. In addition to that, IShares European is 1.54 times more volatile than iShares Swiss Dividend. It trades about 0.03 of its total potential returns per unit of risk. iShares Swiss Dividend is currently generating about 0.33 per unit of volatility. If you would invest  15,641  in iShares Swiss Dividend on December 30, 2024 and sell it today you would earn a total of  2,259  from holding iShares Swiss Dividend or generate 14.44% return on investment over 90 days.

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

iShares European Property  vs.  iShares Swiss Dividend

iShares European Property

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares European Property are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares European is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Swiss Dividend

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Swiss Dividend are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares Swiss unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares European and IShares Swiss

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

The idea behind iShares European Property and iShares Swiss Dividend 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.