Correlation Between Ishares Msci and Swan Defined

Can any of the company-specific risk be diversified away by investing in both Ishares Msci and Swan Defined 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 Msci and Swan Defined into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ishares Msci Eafe and Swan Defined Risk, you can compare the effects of market volatilities on Ishares Msci and Swan Defined 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 Msci with a short position of Swan Defined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Msci and Swan Defined.

Diversification Opportunities for Ishares Msci and Swan Defined

-0.21

Correlation Coefficient

Ishares Msci  Swan Defined

Very good diversification

The 3 months correlation between Ishares and Swan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Msci Eafe and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk and Ishares Msci 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 Msci Eafe are associated (or correlated) with Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of Ishares Msci i.e., Ishares Msci and Swan Defined go up and down completely randomly.

Pair Corralation between Ishares Msci and Swan Defined

Assuming the 90 days horizon Ishares Msci Eafe is expected to generate 1.01 times more return on investment than Swan Defined. However, Ishares Msci is 1.01 times more volatile than Swan Defined Risk. It trades about 0.03 of its potential returns per unit of risk. Swan Defined Risk is currently generating about 0.02 per unit of risk. If you would invest  1,375  in Ishares Msci Eafe on October 5, 2024 and sell it today you would earn a total of  128.00  from holding Ishares Msci Eafe or generate 9.31% return on investment over 90 days.

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

Ishares Msci Eafe  vs.  Swan Defined Risk

Ishares Msci Eafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ishares Msci Eafe has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Swan Defined Risk

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swan Defined Risk are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Swan Defined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Msci and Swan Defined

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

The idea behind Ishares Msci Eafe and Swan Defined Risk 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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