Correlation Between IShares MSCI and Change Finance

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

By analyzing existing cross correlation between iShares MSCI ACWI and Change Finance Diversified, you can compare the effects of market volatilities on IShares MSCI and Change Finance 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 Change Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Change Finance.

Diversification Opportunities for IShares MSCI and Change Finance

0.89

Correlation Coefficient

IShares MSCI  Change Finance

Very poor diversification

The 3 months correlation between IShares and Change is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI and Change Finance Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Change Finance Diver 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 ACWI are associated (or correlated) with Change Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Change Finance Diver has no effect on the direction of IShares MSCI i.e., IShares MSCI and Change Finance go up and down completely randomly.

Pair Corralation between IShares MSCI and Change Finance

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.72 times less return on investment than Change Finance. In addition to that, IShares MSCI is 1.0 times more volatile than Change Finance Diversified. It trades about 0.08 of its total potential returns per unit of risk. Change Finance Diversified is currently generating about 0.14 per unit of volatility. If you would invest  3,890  in Change Finance Diversified on October 26, 2024 and sell it today you would earn a total of  83.00  from holding Change Finance Diversified or generate 2.13% return on investment over 90 days.

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

iShares MSCI ACWI  vs.  Change Finance Diversified

iShares MSCI ACWI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI ACWI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Change Finance Diver

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Change Finance Diversified are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Change Finance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Change Finance

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

The idea behind iShares MSCI ACWI and Change Finance Diversified 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.