Correlation Between CT Private and IShares MSCI

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

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

Diversification Opportunities for CT Private and IShares MSCI

0.44

Correlation Coefficient

CT Private  IShares MSCI

Very weak diversification

The 3 months correlation between CTPE and IShares is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CT Private Equity and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and CT Private 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 CT Private Equity 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 Japan has no effect on the direction of CT Private i.e., CT Private and IShares MSCI go up and down completely randomly.

Pair Corralation between CT Private and IShares MSCI

Assuming the 90 days trading horizon CT Private Equity is expected to generate 2.02 times more return on investment than IShares MSCI. However, CT Private is 2.02 times more volatile than iShares MSCI Japan. It trades about 0.04 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about -0.04 per unit of risk. If you would invest  45,733  in CT Private Equity on December 3, 2024 and sell it today you would earn a total of  1,567  from holding CT Private Equity or generate 3.43% return on investment over 90 days.

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

CT Private Equity  vs.  iShares MSCI Japan

CT Private Equity

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CT Private Equity are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CT Private is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI Japan

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI Japan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares MSCI 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 CT Private and IShares MSCI

The main advantage of trading using opposite CT Private and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CT Private 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 CT Private Equity and iShares MSCI Japan 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.