Correlation Between IShares Trust and IShares Emergent

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

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

Diversification Opportunities for IShares Trust and IShares Emergent

0.58

Correlation Coefficient

IShares Trust  IShares Emergent

Very weak diversification

The 3 months correlation between IShares and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares Emergent Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emergent Food and IShares Trust 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 Trust are associated (or correlated) with IShares Emergent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emergent Food has no effect on the direction of IShares Trust i.e., IShares Trust and IShares Emergent go up and down completely randomly.

Pair Corralation between IShares Trust and IShares Emergent

Given the investment horizon of 90 days iShares Trust is expected to under-perform the IShares Emergent. But the etf apears to be less risky and, when comparing its historical volatility, iShares Trust is 1.05 times less risky than IShares Emergent. The etf trades about -0.01 of its potential returns per unit of risk. The iShares Emergent Food is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,964  in iShares Emergent Food on December 30, 2024 and sell it today you would earn a total of  47.00  from holding iShares Emergent Food or generate 2.39% return on investment over 90 days.

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

iShares Trust   vs.  iShares Emergent Food

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares Trust is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

iShares Emergent Food

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emergent Food are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Emergent is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Trust and IShares Emergent

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

The idea behind iShares Trust and iShares Emergent Food 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.