Correlation Between IShares SP and Eurocastle Investment

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

By analyzing existing cross correlation between iShares SP 500 and Eurocastle Investment, you can compare the effects of market volatilities on IShares SP and Eurocastle Investment 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 SP with a short position of Eurocastle Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Eurocastle Investment.

Diversification Opportunities for IShares SP and Eurocastle Investment

-0.08

Correlation Coefficient

IShares SP  Eurocastle Investment

Good diversification

The 3 months correlation between IShares and Eurocastle is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Eurocastle Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurocastle Investment and IShares SP 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 SP 500 are associated (or correlated) with Eurocastle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurocastle Investment has no effect on the direction of IShares SP i.e., IShares SP and Eurocastle Investment go up and down completely randomly.

Pair Corralation between IShares SP and Eurocastle Investment

Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the Eurocastle Investment. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP 500 is 11.91 times less risky than Eurocastle Investment. The etf trades about -0.22 of its potential returns per unit of risk. The Eurocastle Investment is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  710.00  in Eurocastle Investment on September 23, 2024 and sell it today you would earn a total of  230.00  from holding Eurocastle Investment or generate 32.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.94%
Values	Daily Returns

iShares SP 500  vs.  Eurocastle Investment

iShares SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Eurocastle Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eurocastle Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Eurocastle Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SP and Eurocastle Investment

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

The idea behind iShares SP 500 and Eurocastle Investment 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.