Correlation Between IShares VII and SPDR MSCI

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

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

Diversification Opportunities for IShares VII and SPDR MSCI

-0.28

Correlation Coefficient

IShares VII  SPDR MSCI

Very good diversification

The 3 months correlation between IShares and SPDR is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and SPDR MSCI EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI EM and IShares VII 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 VII PLC are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI EM has no effect on the direction of IShares VII i.e., IShares VII and SPDR MSCI go up and down completely randomly.

Pair Corralation between IShares VII and SPDR MSCI

Assuming the 90 days trading horizon iShares VII PLC is expected to under-perform the SPDR MSCI. In addition to that, IShares VII is 1.05 times more volatile than SPDR MSCI EM. It trades about -0.07 of its total potential returns per unit of risk. SPDR MSCI EM is currently generating about 0.04 per unit of volatility. If you would invest  6,909  in SPDR MSCI EM on December 30, 2024 and sell it today you would earn a total of  171.00  from holding SPDR MSCI EM or generate 2.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

iShares VII PLC  vs.  SPDR MSCI EM

iShares VII PLC

Risk-Adjusted Performance

Very Weak

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

SPDR MSCI EM

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI EM are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares VII and SPDR MSCI

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

The idea behind iShares VII PLC and SPDR MSCI EM 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.