Correlation Between IShares SP and Baloise Holding

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

By analyzing existing cross correlation between iShares SP 500 and Baloise Holding AG, you can compare the effects of market volatilities on IShares SP and Baloise Holding 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 SP with a short position of Baloise Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Baloise Holding.

Diversification Opportunities for IShares SP and Baloise Holding

0.5

Correlation Coefficient

IShares SP  Baloise Holding

Very weak diversification

The 3 months correlation between IShares and Baloise is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Baloise Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baloise Holding AG and IShares SP 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 SP 500 are associated (or correlated) with Baloise Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baloise Holding AG has no effect on the direction of IShares SP i.e., IShares SP and Baloise Holding go up and down completely randomly.

Pair Corralation between IShares SP and Baloise Holding

Assuming the 90 days trading horizon IShares SP is expected to generate 2.43 times less return on investment than Baloise Holding. But when comparing it to its historical volatility, iShares SP 500 is 1.38 times less risky than Baloise Holding. It trades about 0.13 of its potential returns per unit of risk. Baloise Holding AG is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  16,410  in Baloise Holding AG on December 30, 2024 and sell it today you would earn a total of  2,560  from holding Baloise Holding AG or generate 15.6% return on investment over 90 days.

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

iShares SP 500  vs.  Baloise Holding AG

iShares SP 500

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Baloise Holding AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baloise Holding AG are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Baloise Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SP and Baloise Holding

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

The idea behind iShares SP 500 and Baloise Holding AG 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.