Correlation Between IShares Global and IShares JPX

Can any of the company-specific risk be diversified away by investing in both IShares Global and IShares JPX 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 JPX 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 JPX Nikkei 400, you can compare the effects of market volatilities on IShares Global and IShares JPX 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 JPX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and IShares JPX.

Diversification Opportunities for IShares Global and IShares JPX

0.0

Correlation Coefficient

IShares Global  IShares JPX

Pay attention - limited upside

The 3 months correlation between IShares and IShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global AAA AA and IShares JPX Nikkei 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares JPX Nikkei 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 JPX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares JPX Nikkei has no effect on the direction of IShares Global i.e., IShares Global and IShares JPX go up and down completely randomly.

Pair Corralation between IShares Global and IShares JPX

If you would invest  7,243  in iShares Global AAA AA on September 12, 2024 and sell it today you would earn a total of  81.00  from holding iShares Global AAA AA or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

iShares Global AAA AA  vs.  IShares JPX Nikkei 400

iShares Global AAA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global AAA AA are ranked lower than 4 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IShares JPX Nikkei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares JPX Nikkei 400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, IShares JPX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and IShares JPX

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

The idea behind iShares Global AAA AA and IShares JPX Nikkei 400 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.