Correlation Between Barclays Capital and IShares MSCI

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

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

Diversification Opportunities for Barclays Capital and IShares MSCI

0.74

Correlation Coefficient

Barclays Capital  IShares MSCI

Poor diversification

The 3 months correlation between Barclays and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Barclays Capital and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China and Barclays Capital 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 Barclays Capital 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 China has no effect on the direction of Barclays Capital i.e., Barclays Capital and IShares MSCI go up and down completely randomly.

Pair Corralation between Barclays Capital and IShares MSCI

If you would invest  2,384  in iShares MSCI China on September 13, 2024 and sell it today you would earn a total of  554.00  from holding iShares MSCI China or generate 23.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Barclays Capital  vs.  iShares MSCI China

Barclays Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barclays Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Barclays Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares MSCI China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, IShares MSCI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays Capital and IShares MSCI

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

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.