Correlation Between IShares MSCI and IShares MSCI

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

Diversification Opportunities for IShares MSCI and IShares MSCI

-0.24

Correlation Coefficient

IShares MSCI  IShares MSCI

Very good diversification

The 3 months correlation between IShares and IShares is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global 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 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 Global has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares MSCI

Given the investment horizon of 90 days iShares MSCI Emerging is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Emerging is 2.62 times less risky than IShares MSCI. The etf trades about -0.03 of its potential returns per unit of risk. The iShares MSCI Global is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,144  in iShares MSCI Global on December 28, 2024 and sell it today you would earn a total of  348.00  from holding iShares MSCI Global or generate 30.42% return on investment over 90 days.

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

iShares MSCI Emerging  vs.  iShares MSCI Global

iShares MSCI Emerging

Risk-Adjusted Performance

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 comparatively stable primary 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.

iShares MSCI Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, IShares MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and IShares MSCI

The main advantage of trading using opposite IShares MSCI and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI Emerging and iShares MSCI Global 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.