Correlation Between IShares VII and Deka EURO

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

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

Diversification Opportunities for IShares VII and Deka EURO

-0.16

Correlation Coefficient

IShares VII  Deka EURO

Good diversification

The 3 months correlation between IShares and Deka is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Deka EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka EURO STOXX and IShares VII 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 VII PLC are associated (or correlated) with Deka EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka EURO STOXX has no effect on the direction of IShares VII i.e., IShares VII and Deka EURO go up and down completely randomly.

Pair Corralation between IShares VII and Deka EURO

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 1.68 times more return on investment than Deka EURO. However, IShares VII is 1.68 times more volatile than Deka EURO STOXX. It trades about 0.09 of its potential returns per unit of risk. Deka EURO STOXX is currently generating about -0.07 per unit of risk. If you would invest  23,060  in iShares VII PLC on September 17, 2024 and sell it today you would earn a total of  1,480  from holding iShares VII PLC or generate 6.42% return on investment over 90 days.

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

iShares VII PLC  vs.  Deka EURO STOXX

iShares VII PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deka EURO STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka EURO STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deka EURO is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares VII and Deka EURO

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

The idea behind iShares VII PLC and Deka EURO STOXX 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.