Correlation Between IShares Core and Expat Czech

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

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

Diversification Opportunities for IShares Core and Expat Czech

0.82

Correlation Coefficient

IShares Core  Expat Czech

Very poor diversification

The 3 months correlation between IShares and Expat is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Expat Czech PX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expat Czech PX and IShares Core 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 Core SP are associated (or correlated) with Expat Czech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expat Czech PX has no effect on the direction of IShares Core i.e., IShares Core and Expat Czech go up and down completely randomly.

Pair Corralation between IShares Core and Expat Czech

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.75 times more return on investment than Expat Czech. However, iShares Core SP is 1.33 times less risky than Expat Czech. It trades about 0.12 of its potential returns per unit of risk. Expat Czech PX is currently generating about 0.07 per unit of risk. If you would invest  36,879  in iShares Core SP on September 12, 2024 and sell it today you would earn a total of  23,851  from holding iShares Core SP or generate 64.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

iShares Core SP  vs.  Expat Czech PX

iShares Core SP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Expat Czech PX

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Expat Czech PX are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Expat Czech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Expat Czech

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

The idea behind iShares Core SP and Expat Czech PX 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.