Correlation Between IShares JPX and IShares Emerging

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

By analyzing existing cross correlation between IShares JPX Nikkei 400 and iShares Emerging Markets, you can compare the effects of market volatilities on IShares JPX and IShares Emerging 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 JPX with a short position of IShares Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares JPX and IShares Emerging.

Diversification Opportunities for IShares JPX and IShares Emerging

0.0

Correlation Coefficient

IShares JPX  IShares Emerging

Pay attention - limited upside

The 3 months correlation between IShares and IShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding IShares JPX Nikkei 400 and iShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emerging Markets and IShares JPX 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 JPX Nikkei 400 are associated (or correlated) with IShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emerging Markets has no effect on the direction of IShares JPX i.e., IShares JPX and IShares Emerging go up and down completely randomly.

Pair Corralation between IShares JPX and IShares Emerging

If you would invest  4,015  in iShares Emerging Markets on September 12, 2024 and sell it today you would earn a total of  91.00  from holding iShares Emerging Markets or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

IShares JPX Nikkei 400  vs.  iShares Emerging Markets

IShares JPX Nikkei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares JPX Nikkei 400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, IShares JPX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Emerging Markets

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emerging Markets are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares JPX and IShares Emerging

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

The idea behind IShares JPX Nikkei 400 and iShares Emerging Markets 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.