Correlation Between BetaShares Global and IShares Global

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

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

Diversification Opportunities for BetaShares Global and IShares Global

0.64

Correlation Coefficient

BetaShares Global  IShares Global

Poor diversification

The 3 months correlation between BetaShares and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Global Banks and iShares Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Consumer and BetaShares 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 BetaShares Global Banks are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Consumer has no effect on the direction of BetaShares Global i.e., BetaShares Global and IShares Global go up and down completely randomly.

Pair Corralation between BetaShares Global and IShares Global

Assuming the 90 days trading horizon BetaShares Global Banks is expected to generate 1.54 times more return on investment than IShares Global. However, BetaShares Global is 1.54 times more volatile than iShares Global Consumer. It trades about 0.08 of its potential returns per unit of risk. iShares Global Consumer is currently generating about 0.05 per unit of risk. If you would invest  597.00  in BetaShares Global Banks on September 26, 2024 and sell it today you would earn a total of  253.00  from holding BetaShares Global Banks or generate 42.38% return on investment over 90 days.

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

BetaShares Global Banks  vs.  iShares Global Consumer

BetaShares Global Banks

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Global Banks are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Global Consumer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BetaShares Global and IShares Global

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

The idea behind BetaShares Global Banks and iShares Global Consumer 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.