Correlation Between IShares MSCI and BlackRock Carbon

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and BlackRock Carbon 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 BlackRock Carbon 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 BlackRock Carbon Transition, you can compare the effects of market volatilities on IShares MSCI and BlackRock Carbon 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 BlackRock Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and BlackRock Carbon.

Diversification Opportunities for IShares MSCI and BlackRock Carbon

0.85

Correlation Coefficient

IShares MSCI  BlackRock Carbon

Very poor diversification

The 3 months correlation between IShares and BlackRock is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI and BlackRock Carbon Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Carbon Tra 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 BlackRock Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Carbon Tra has no effect on the direction of IShares MSCI i.e., IShares MSCI and BlackRock Carbon go up and down completely randomly.

Pair Corralation between IShares MSCI and BlackRock Carbon

Given the investment horizon of 90 days iShares MSCI ACWI is expected to generate 0.88 times more return on investment than BlackRock Carbon. However, iShares MSCI ACWI is 1.14 times less risky than BlackRock Carbon. It trades about -0.03 of its potential returns per unit of risk. BlackRock Carbon Transition is currently generating about -0.09 per unit of risk. If you would invest  19,446  in iShares MSCI ACWI on December 29, 2024 and sell it today you would lose (351.00) from holding iShares MSCI ACWI or give up 1.8% of portfolio value over 90 days.

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

iShares MSCI ACWI  vs.  BlackRock Carbon Transition

iShares MSCI ACWI

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI ACWI has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

BlackRock Carbon Tra

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Carbon Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BlackRock Carbon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares MSCI and BlackRock Carbon

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

The idea behind iShares MSCI ACWI and BlackRock Carbon Transition 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.