Correlation Between IShares International and The Us

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

By analyzing existing cross correlation between iShares International Developed and The Government Fixed, you can compare the effects of market volatilities on IShares International and The Us 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 International with a short position of The Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and The Us.

Diversification Opportunities for IShares International and The Us

0.3

Correlation Coefficient

IShares International  The Us

Weak diversification

The 3 months correlation between IShares and The is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Develope and The Government Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Fixed and IShares International 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 International Developed are associated (or correlated) with The Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Fixed has no effect on the direction of IShares International i.e., IShares International and The Us go up and down completely randomly.

Pair Corralation between IShares International and The Us

Given the investment horizon of 90 days iShares International Developed is expected to generate 2.93 times more return on investment than The Us. However, IShares International is 2.93 times more volatile than The Government Fixed. It trades about 0.06 of its potential returns per unit of risk. The Government Fixed is currently generating about -0.01 per unit of risk. If you would invest  2,078  in iShares International Developed on February 5, 2024 and sell it today you would earn a total of  29.00  from holding iShares International Developed or generate 1.4% return on investment over 90 days.

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

iShares International Develope  vs.  The Government Fixed

iShares International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Developed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, IShares International is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Government Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Government Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Us 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 International and The Us

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

The idea behind iShares International Developed and The Government Fixed 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.