Correlation Between IShares Emerging and IShares Smart

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

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

Diversification Opportunities for IShares Emerging and IShares Smart

0.4

Correlation Coefficient

IShares Emerging  IShares Smart

Very weak diversification

The 3 months correlation between IShares and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emerging Markets and iShares Smart City in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Smart City and IShares Emerging 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 Emerging Markets are associated (or correlated) with IShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Smart City has no effect on the direction of IShares Emerging i.e., IShares Emerging and IShares Smart go up and down completely randomly.

Pair Corralation between IShares Emerging and IShares Smart

Assuming the 90 days trading horizon IShares Emerging is expected to generate 2.42 times less return on investment than IShares Smart. But when comparing it to its historical volatility, iShares Emerging Markets is 2.77 times less risky than IShares Smart. It trades about 0.15 of its potential returns per unit of risk. iShares Smart City is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  704.00  in iShares Smart City on September 3, 2024 and sell it today you would earn a total of  53.00  from holding iShares Smart City or generate 7.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

iShares Emerging Markets  vs.  iShares Smart City

iShares Emerging Markets

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Markets are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Smart City

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Smart City are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, IShares Smart may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Emerging and IShares Smart

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

The idea behind iShares Emerging Markets and iShares Smart City 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.