Correlation Between IShares MSCI and Xtrackers Emerging

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

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

Diversification Opportunities for IShares MSCI and Xtrackers Emerging

0.99

Correlation Coefficient

IShares MSCI  Xtrackers Emerging

No risk reduction

The 3 months correlation between IShares and Xtrackers is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and Xtrackers Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Emerging 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 Emerging are associated (or correlated) with Xtrackers Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Emerging has no effect on the direction of IShares MSCI i.e., IShares MSCI and Xtrackers Emerging go up and down completely randomly.

Pair Corralation between IShares MSCI and Xtrackers Emerging

Considering the 90-day investment horizon iShares MSCI Emerging is expected to generate 0.96 times more return on investment than Xtrackers Emerging. However, iShares MSCI Emerging is 1.04 times less risky than Xtrackers Emerging. It trades about 0.07 of its potential returns per unit of risk. Xtrackers Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest  4,196  in iShares MSCI Emerging on December 30, 2024 and sell it today you would earn a total of  181.00  from holding iShares MSCI Emerging or generate 4.31% return on investment over 90 days.

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

iShares MSCI Emerging  vs.  Xtrackers Emerging Markets

iShares MSCI Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Emerging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Xtrackers Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Emerging Markets are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Xtrackers Emerging is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares MSCI and Xtrackers Emerging

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

The idea behind iShares MSCI Emerging and Xtrackers Emerging Markets 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.