Correlation Between IShares Global and IShares V

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

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

Diversification Opportunities for IShares Global and IShares V

0.25

Correlation Coefficient

IShares Global  IShares V

Modest diversification

The 3 months correlation between IShares and IShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global AAA AA and iShares V Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares V Public and IShares 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 iShares Global AAA AA are associated (or correlated) with IShares V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares V Public has no effect on the direction of IShares Global i.e., IShares Global and IShares V go up and down completely randomly.

Pair Corralation between IShares Global and IShares V

Assuming the 90 days trading horizon IShares Global is expected to generate 6.05 times less return on investment than IShares V. But when comparing it to its historical volatility, iShares Global AAA AA is 3.74 times less risky than IShares V. It trades about 0.1 of its potential returns per unit of risk. iShares V Public is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  819.00  in iShares V Public on September 4, 2024 and sell it today you would earn a total of  97.00  from holding iShares V Public or generate 11.84% return on investment over 90 days.

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

iShares Global AAA AA  vs.  iShares V Public

iShares Global AAA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global AAA AA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares V Public

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares V Public are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares V may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Global and IShares V

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

The idea behind iShares Global AAA AA and iShares V Public 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.