Correlation Between ALPS Emerging and IShares Currency
Can any of the company-specific risk be diversified away by investing in both ALPS Emerging 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 ALPS Emerging and IShares Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALPS Emerging Sector and iShares Currency Hedged, you can compare the effects of market volatilities on ALPS Emerging 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 ALPS Emerging with a short position of IShares Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPS Emerging and IShares Currency.
Diversification Opportunities for ALPS Emerging and IShares Currency
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ALPS and IShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ALPS Emerging Sector 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 ALPS Emerging 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 ALPS Emerging Sector 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 ALPS Emerging i.e., ALPS Emerging and IShares Currency go up and down completely randomly.
Pair Corralation between ALPS Emerging and IShares Currency
Given the investment horizon of 90 days ALPS Emerging Sector is expected to under-perform the IShares Currency. But the etf apears to be less risky and, when comparing its historical volatility, ALPS Emerging Sector is 1.05 times less risky than IShares Currency. The etf trades about -0.11 of its potential returns per unit of risk. The iShares Currency Hedged is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,546 in iShares Currency Hedged on January 26, 2024 and sell it today you would earn a total of 13.80 from holding iShares Currency Hedged or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
ALPS Emerging Sector vs. iShares Currency Hedged
Performance |
| Timeline |
| ALPS Emerging Sector |
| iShares Currency Hedged |
ALPS Emerging and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ALPS Emerging and IShares Currency
The main advantage of trading using opposite ALPS Emerging and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALPS Emerging 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 ALPS Emerging Sector 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.Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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