Correlation Between BlackRock World and IShares

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

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

Diversification Opportunities for BlackRock World and IShares

-0.34

Correlation Coefficient

BlackRock World  IShares

Very good diversification

The 3 months correlation between BlackRock and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock World ex and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares and BlackRock World 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 BlackRock World ex are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of BlackRock World i.e., BlackRock World and IShares go up and down completely randomly.

Pair Corralation between BlackRock World and IShares

Given the investment horizon of 90 days BlackRock World is expected to generate 1.33 times less return on investment than IShares. But when comparing it to its historical volatility, BlackRock World ex is 1.62 times less risky than IShares. It trades about 0.04 of its potential returns per unit of risk. IShares is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,790  in IShares on October 27, 2024 and sell it today you would earn a total of  132.00  from holding IShares or generate 4.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.68%
Values	Daily Returns

BlackRock World ex  vs.  IShares

BlackRock World ex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock World ex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BlackRock World is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BlackRock World and IShares

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

The idea behind BlackRock World ex and IShares 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.