Correlation Between IShares MSCI and Db X

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

Diversification Opportunities for IShares MSCI and Db X

0.6

Correlation Coefficient

IShares MSCI  Db X

Poor diversification

The 3 months correlation between IShares and XWLD is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and db x trackers MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on db x trackers 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 Db X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of db x trackers has no effect on the direction of IShares MSCI i.e., IShares MSCI and Db X go up and down completely randomly.

Pair Corralation between IShares MSCI and Db X

Assuming the 90 days trading horizon iShares MSCI Japan is expected to generate 1.04 times more return on investment than Db X. However, IShares MSCI is 1.04 times more volatile than db x trackers MSCI. It trades about 0.08 of its potential returns per unit of risk. db x trackers MSCI is currently generating about -0.07 per unit of risk. If you would invest  487.00  in iShares MSCI Japan on December 22, 2024 and sell it today you would earn a total of  20.00  from holding iShares MSCI Japan or generate 4.11% return on investment over 90 days.

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

iShares MSCI Japan  vs.  db x trackers MSCI

iShares MSCI Japan

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

db x trackers

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares MSCI and Db X

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

The idea behind iShares MSCI Japan and db x trackers MSCI 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.