Correlation Between IShares JP and Edinburgh Worldwide

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

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

Diversification Opportunities for IShares JP and Edinburgh Worldwide

0.6

Correlation Coefficient

IShares JP  Edinburgh Worldwide

Poor diversification

The 3 months correlation between IShares and Edinburgh is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and Edinburgh Worldwide Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edinburgh Worldwide and IShares JP 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 JP Morgan are associated (or correlated) with Edinburgh Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edinburgh Worldwide has no effect on the direction of IShares JP i.e., IShares JP and Edinburgh Worldwide go up and down completely randomly.

Pair Corralation between IShares JP and Edinburgh Worldwide

Assuming the 90 days trading horizon iShares JP Morgan is expected to generate 0.37 times more return on investment than Edinburgh Worldwide. However, iShares JP Morgan is 2.73 times less risky than Edinburgh Worldwide. It trades about 0.25 of its potential returns per unit of risk. Edinburgh Worldwide Investment is currently generating about 0.01 per unit of risk. If you would invest  331,458  in iShares JP Morgan on October 24, 2024 and sell it today you would earn a total of  6,992  from holding iShares JP Morgan or generate 2.11% return on investment over 90 days.

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

iShares JP Morgan  vs.  Edinburgh Worldwide Investment

iShares JP Morgan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares JP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Edinburgh Worldwide

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edinburgh Worldwide Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Edinburgh Worldwide exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares JP and Edinburgh Worldwide

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

The idea behind iShares JP Morgan and Edinburgh Worldwide Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.