Correlation Between IShares Global and MRG Metals

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

Diversification Opportunities for IShares Global and MRG Metals

0.08

Correlation Coefficient

IShares Global  MRG Metals

Significant diversification

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

Pair Corralation between IShares Global and MRG Metals

Assuming the 90 days trading horizon iShares Global Healthcare is expected to under-perform the MRG Metals. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Healthcare is 17.61 times less risky than MRG Metals. The etf trades about -0.12 of its potential returns per unit of risk. The MRG Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.35  in MRG Metals on September 3, 2024 and sell it today you would lose (0.05) from holding MRG Metals or give up 14.29% of portfolio value over 90 days.

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

iShares Global Healthcare  vs.  MRG Metals

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.

MRG Metals

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with IShares Global and MRG Metals

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

The idea behind iShares Global Healthcare and MRG Metals 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.