Correlation Between IShares Nasdaq and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares Nasdaq and IShares MSCI 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 Nasdaq and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Nasdaq Biotechnology and iShares MSCI Europe, you can compare the effects of market volatilities on IShares Nasdaq and IShares MSCI 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 Nasdaq with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Nasdaq and IShares MSCI.
Diversification Opportunities for IShares Nasdaq and IShares MSCI
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares Nasdaq Biotechnology and iShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Europe and IShares Nasdaq 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 Nasdaq Biotechnology are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Europe has no effect on the direction of IShares Nasdaq i.e., IShares Nasdaq and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares Nasdaq and IShares MSCI
Assuming the 90 days trading horizon iShares Nasdaq Biotechnology is expected to under-perform the IShares MSCI. In addition to that, IShares Nasdaq is 1.66 times more volatile than iShares MSCI Europe. It trades about -0.02 of its total potential returns per unit of risk. iShares MSCI Europe is currently generating about 0.05 per unit of volatility. If you would invest 71,411 in iShares MSCI Europe on September 6, 2024 and sell it today you would earn a total of 1,734 from holding iShares MSCI Europe or generate 2.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Nasdaq Biotechnology vs. iShares MSCI Europe
Performance |
Timeline |
iShares Nasdaq Biote |
iShares MSCI Europe |
IShares Nasdaq and IShares MSCI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Nasdaq and IShares MSCI
The main advantage of trading using opposite IShares Nasdaq and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Nasdaq position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.IShares Nasdaq vs. Vanguard FTSE Developed | IShares Nasdaq vs. Leverage Shares 2x | IShares Nasdaq vs. Amundi Index Solutions | IShares Nasdaq vs. Amundi Index Solutions |
IShares MSCI vs. GraniteShares 3x Short | IShares MSCI vs. WisdomTree Natural Gas | IShares MSCI vs. Leverage Shares 3x | IShares MSCI vs. WisdomTree Natural Gas |
Check out your portfolio center.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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