Correlation Between IShares Global and IShares Currency

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

By analyzing existing cross correlation between iShares Global Consumer and iShares Currency Hedged, you can compare the effects of market volatilities on IShares Global and IShares Currency 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 Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and IShares Currency.

Diversification Opportunities for IShares Global and IShares Currency

0.36

Correlation Coefficient

IShares Global  IShares Currency

Weak diversification

The 3 months correlation between IShares and IShares is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Consumer and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 Consumer are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of IShares Global i.e., IShares Global and IShares Currency go up and down completely randomly.

Pair Corralation between IShares Global and IShares Currency

Considering the 90-day investment horizon iShares Global Consumer is expected to generate 1.38 times more return on investment than IShares Currency. However, IShares Global is 1.38 times more volatile than iShares Currency Hedged. It trades about 0.08 of its potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.09 per unit of risk. If you would invest  14,522  in iShares Global Consumer on October 5, 2024 and sell it today you would earn a total of  4,022  from holding iShares Global Consumer or generate 27.7% return on investment over 90 days.

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

iShares Global Consumer  vs.  iShares Currency Hedged

iShares Global Consumer

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

iShares Currency Hedged

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Currency Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, IShares Currency is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and IShares Currency

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

The idea behind iShares Global Consumer and iShares Currency Hedged 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.