Correlation Between IShares Trust and IShares BMFBovespa

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

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

Diversification Opportunities for IShares Trust and IShares BMFBovespa

-0.46

Correlation Coefficient

IShares Trust  IShares BMFBovespa

Very good diversification

The 3 months correlation between IShares and IShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares BMFBovespa Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BMFBovespa Small and IShares Trust 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 Trust are associated (or correlated) with IShares BMFBovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BMFBovespa Small has no effect on the direction of IShares Trust i.e., IShares Trust and IShares BMFBovespa go up and down completely randomly.

Pair Corralation between IShares Trust and IShares BMFBovespa

Assuming the 90 days trading horizon iShares Trust is expected to generate 0.91 times more return on investment than IShares BMFBovespa. However, iShares Trust is 1.1 times less risky than IShares BMFBovespa. It trades about 0.14 of its potential returns per unit of risk. iShares BMFBovespa Small is currently generating about -0.09 per unit of risk. If you would invest  5,681  in iShares Trust on September 3, 2024 and sell it today you would earn a total of  631.00  from holding iShares Trust or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

iShares Trust   vs.  iShares BMFBovespa Small

iShares Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares BMFBovespa Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares BMFBovespa Small has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Trust and IShares BMFBovespa

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

The idea behind iShares Trust and iShares BMFBovespa Small 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.