Correlation Between IShares Core and IShares AEX

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

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

Diversification Opportunities for IShares Core and IShares AEX

0.61

Correlation Coefficient

IShares Core  IShares AEX

Poor diversification

The 3 months correlation between IShares and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and iShares AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AEX UCITS and IShares Core 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 Core MSCI are associated (or correlated) with IShares AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AEX UCITS has no effect on the direction of IShares Core i.e., IShares Core and IShares AEX go up and down completely randomly.

Pair Corralation between IShares Core and IShares AEX

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.05 times more return on investment than IShares AEX. However, IShares Core is 1.05 times more volatile than iShares AEX UCITS. It trades about 0.0 of its potential returns per unit of risk. iShares AEX UCITS is currently generating about -0.08 per unit of risk. If you would invest  3,336  in iShares Core MSCI on September 26, 2024 and sell it today you would lose (11.00) from holding iShares Core MSCI or give up 0.33% of portfolio value over 90 days.

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

iShares Core MSCI  vs.  iShares AEX UCITS

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Core is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares AEX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares AEX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares AEX 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 IShares Core and IShares AEX

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

The idea behind iShares Core MSCI and iShares AEX UCITS 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.