Correlation Between IShares MSCI and Macquarie Focused

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

Diversification Opportunities for IShares MSCI and Macquarie Focused

0.86

Correlation Coefficient

IShares MSCI  Macquarie Focused

Very poor diversification

The 3 months correlation between IShares and Macquarie is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and Macquarie Focused Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Focused 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 Macquarie Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Focused has no effect on the direction of IShares MSCI i.e., IShares MSCI and Macquarie Focused go up and down completely randomly.

Pair Corralation between IShares MSCI and Macquarie Focused

Considering the 90-day investment horizon IShares MSCI is expected to generate 3.97 times less return on investment than Macquarie Focused. But when comparing it to its historical volatility, iShares MSCI Emerging is 1.33 times less risky than Macquarie Focused. It trades about 0.08 of its potential returns per unit of risk. Macquarie Focused Emerging is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,472  in Macquarie Focused Emerging on October 27, 2024 and sell it today you would earn a total of  117.00  from holding Macquarie Focused Emerging or generate 4.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

iShares MSCI Emerging  vs.  Macquarie Focused Emerging

iShares MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Macquarie Focused

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Focused Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Macquarie Focused is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares MSCI and Macquarie Focused

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

The idea behind iShares MSCI Emerging and Macquarie Focused Emerging 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.