Correlation Between Avantis Emerging and IShares SP

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

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

Diversification Opportunities for Avantis Emerging and IShares SP

-0.68

Correlation Coefficient

Avantis Emerging  IShares SP

Excellent diversification

The 3 months correlation between Avantis and IShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small and Avantis 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 Avantis Emerging Markets are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP Small has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and IShares SP go up and down completely randomly.

Pair Corralation between Avantis Emerging and IShares SP

Given the investment horizon of 90 days Avantis Emerging Markets is expected to under-perform the IShares SP. But the etf apears to be less risky and, when comparing its historical volatility, Avantis Emerging Markets is 1.01 times less risky than IShares SP. The etf trades about -0.08 of its potential returns per unit of risk. The iShares SP Small Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,673  in iShares SP Small Cap on September 20, 2024 and sell it today you would earn a total of  631.00  from holding iShares SP Small Cap or generate 5.91% return on investment over 90 days.

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

Avantis Emerging Markets  vs.  iShares SP Small Cap

Avantis Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

iShares SP Small

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP Small Cap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, IShares SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Avantis Emerging and IShares SP

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

The idea behind Avantis Emerging Markets and iShares SP Small Cap 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.