Correlation Between IShares Global and Errawarra Resources

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

By analyzing existing cross correlation between iShares Global Healthcare and Errawarra Resources, you can compare the effects of market volatilities on IShares Global and Errawarra Resources 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 Errawarra Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Errawarra Resources.

Diversification Opportunities for IShares Global and Errawarra Resources

-0.06

Correlation Coefficient

IShares Global  Errawarra Resources

Good diversification

The 3 months correlation between IShares and Errawarra is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and Errawarra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Errawarra Resources 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 Healthcare are associated (or correlated) with Errawarra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Errawarra Resources has no effect on the direction of IShares Global i.e., IShares Global and Errawarra Resources go up and down completely randomly.

Pair Corralation between IShares Global and Errawarra Resources

Assuming the 90 days trading horizon iShares Global Healthcare is expected to under-perform the Errawarra Resources. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Healthcare is 12.86 times less risky than Errawarra Resources. The etf trades about -0.03 of its potential returns per unit of risk. The Errawarra Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.70  in Errawarra Resources on September 3, 2024 and sell it today you would lose (0.90) from holding Errawarra Resources or give up 11.69% of portfolio value over 90 days.

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

iShares Global Healthcare  vs.  Errawarra Resources

iShares Global Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Errawarra Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Errawarra Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Errawarra Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Global and Errawarra Resources

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

The idea behind iShares Global Healthcare and Errawarra Resources 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.