Correlation Between IShares Global and IShares North

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

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

Diversification Opportunities for IShares Global and IShares North

0.71

Correlation Coefficient

IShares Global  IShares North

Poor diversification

The 3 months correlation between IShares and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Energy and iShares North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares North American and IShares Global 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 Global Energy are associated (or correlated) with IShares North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares North American has no effect on the direction of IShares Global i.e., IShares Global and IShares North go up and down completely randomly.

Pair Corralation between IShares Global and IShares North

Considering the 90-day investment horizon iShares Global Energy is expected to generate 0.95 times more return on investment than IShares North. However, iShares Global Energy is 1.06 times less risky than IShares North. It trades about 0.17 of its potential returns per unit of risk. iShares North American is currently generating about 0.11 per unit of risk. If you would invest  3,769  in iShares Global Energy on December 30, 2024 and sell it today you would earn a total of  407.00  from holding iShares Global Energy or generate 10.8% return on investment over 90 days.

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

iShares Global Energy  vs.  iShares North American

iShares Global Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares North American

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares North American are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, IShares North may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Global and IShares North

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

The idea behind iShares Global Energy and iShares North American 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.