Correlation Between IShares Developed and IShares Swiss

Can any of the company-specific risk be diversified away by investing in both IShares Developed 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 Developed 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 Developed Markets and iShares Swiss Dividend, you can compare the effects of market volatilities on IShares Developed 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 Developed with a short position of IShares Swiss. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Developed and IShares Swiss.

Diversification Opportunities for IShares Developed and IShares Swiss

0.64

Correlation Coefficient

IShares Developed  IShares Swiss

Poor diversification

The 3 months correlation between IShares and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Developed Markets 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 Developed 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 Developed Markets 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 Developed i.e., IShares Developed and IShares Swiss go up and down completely randomly.

Pair Corralation between IShares Developed and IShares Swiss

Assuming the 90 days trading horizon iShares Developed Markets is expected to under-perform the IShares Swiss. In addition to that, IShares Developed is 1.4 times more volatile than iShares Swiss Dividend. It trades about -0.02 of its total potential returns per unit of risk. iShares Swiss Dividend is currently generating about 0.26 per unit of volatility. If you would invest  16,106  in iShares Swiss Dividend on December 5, 2024 and sell it today you would earn a total of  1,628  from holding iShares Swiss Dividend or generate 10.11% return on investment over 90 days.

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

iShares Developed Markets  vs.  iShares Swiss Dividend

iShares Developed Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Developed Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Developed 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Swiss Dividend are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares Swiss may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Developed and IShares Swiss

The main advantage of trading using opposite IShares Developed and IShares Swiss positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Developed 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 Developed Markets 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.