Correlation Between IShares Global and Genworth Financial

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

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

Diversification Opportunities for IShares Global and Genworth Financial

1.0

Correlation Coefficient

IShares Global  Genworth Financial

No risk reduction

The 3 months correlation between IShares and Genworth is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Timber and Genworth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genworth Financial 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 Timber are associated (or correlated) with Genworth Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genworth Financial has no effect on the direction of IShares Global i.e., IShares Global and Genworth Financial go up and down completely randomly.

Pair Corralation between IShares Global and Genworth Financial

Assuming the 90 days trading horizon IShares Global is expected to generate 3.98 times less return on investment than Genworth Financial. But when comparing it to its historical volatility, iShares Global Timber is 10.95 times less risky than Genworth Financial. It trades about 0.06 of its potential returns per unit of risk. Genworth Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,349  in Genworth Financial on September 13, 2024 and sell it today you would earn a total of  831.00  from holding Genworth Financial or generate 8.89% return on investment over 90 days.

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

iShares Global Timber  vs.  Genworth Financial

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

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

Genworth Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genworth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Genworth Financial 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 Genworth Financial

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

The idea behind iShares Global Timber and Genworth Financial 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.