Correlation Between IShares Global and CIMB SP

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

Diversification Opportunities for IShares Global and CIMB SP

-0.21

Correlation Coefficient

IShares Global  CIMB SP

Very good diversification

The 3 months correlation between IShares and CIMB is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global AAA AA and CIMB SP Ethical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB SP Ethical 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 CIMB SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB SP Ethical has no effect on the direction of IShares Global i.e., IShares Global and CIMB SP go up and down completely randomly.

Pair Corralation between IShares Global and CIMB SP

Assuming the 90 days trading horizon iShares Global AAA AA is expected to under-perform the CIMB SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global AAA AA is 3.74 times less risky than CIMB SP. The etf trades about -0.01 of its potential returns per unit of risk. The CIMB SP Ethical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,643  in CIMB SP Ethical on September 16, 2024 and sell it today you would earn a total of  39.00  from holding CIMB SP Ethical or generate 1.07% return on investment over 90 days.

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

iShares Global AAA AA  vs.  CIMB SP Ethical

iShares Global AAA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global AAA AA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

CIMB SP Ethical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CIMB SP Ethical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CIMB SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Global and CIMB SP

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

The idea behind iShares Global AAA AA and CIMB SP Ethical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.