Correlation Between Xtrackers California and IShares MSCI

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

By analyzing existing cross correlation between Xtrackers California Municipal and iShares MSCI Global, you can compare the effects of market volatilities on Xtrackers California 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 Xtrackers California with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers California and IShares MSCI.

Diversification Opportunities for Xtrackers California and IShares MSCI

0.62

Correlation Coefficient

Xtrackers California  IShares MSCI

Poor diversification

The 3 months correlation between Xtrackers and IShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers California Municipal and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global and Xtrackers California 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 Xtrackers California Municipal 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 Global has no effect on the direction of Xtrackers California i.e., Xtrackers California and IShares MSCI go up and down completely randomly.

Pair Corralation between Xtrackers California and IShares MSCI

Allowing for the 90-day total investment horizon Xtrackers California is expected to generate 21.25 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Xtrackers California Municipal is 2.99 times less risky than IShares MSCI. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI Global is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,658  in iShares MSCI Global on September 16, 2024 and sell it today you would earn a total of  136.00  from holding iShares MSCI Global or generate 3.72% return on investment over 90 days.

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

Xtrackers California Municipal  vs.  iShares MSCI Global

Xtrackers California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xtrackers California is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Xtrackers California and IShares MSCI

The main advantage of trading using opposite Xtrackers California and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers California 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.

The idea behind Xtrackers California Municipal and iShares MSCI Global 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.