Correlation Between IShares MSCI and ETC Group

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

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

Diversification Opportunities for IShares MSCI and ETC Group

0.0

Correlation Coefficient

IShares MSCI  ETC Group

Pay attention - limited upside

The 3 months correlation between IShares and ETC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and ETC Group Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC Group Digital 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 Japan are associated (or correlated) with ETC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC Group Digital has no effect on the direction of IShares MSCI i.e., IShares MSCI and ETC Group go up and down completely randomly.

Pair Corralation between IShares MSCI and ETC Group

If you would invest  493.00  in iShares MSCI Japan on September 5, 2024 and sell it today you would earn a total of  26.00  from holding iShares MSCI Japan or generate 5.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

iShares MSCI Japan  vs.  ETC Group Digital

iShares MSCI Japan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Japan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ETC Group Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETC Group Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, ETC Group is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares MSCI and ETC Group

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

The idea behind iShares MSCI Japan and ETC Group Digital 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.