Correlation Between IShares MSCI and EA Series

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

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

Diversification Opportunities for IShares MSCI and EA Series

0.97

Correlation Coefficient

IShares MSCI  EA Series

Almost no diversification

The 3 months correlation between IShares and STXI is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EAFE are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of IShares MSCI i.e., IShares MSCI and EA Series go up and down completely randomly.

Pair Corralation between IShares MSCI and EA Series

Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.05 times more return on investment than EA Series. However, IShares MSCI is 1.05 times more volatile than EA Series Trust. It trades about 0.18 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.17 per unit of risk. If you would invest  7,561  in iShares MSCI EAFE on December 28, 2024 and sell it today you would earn a total of  759.00  from holding iShares MSCI EAFE or generate 10.04% 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 EAFE  vs.  EA Series Trust

iShares MSCI EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

EA Series Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares MSCI and EA Series

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

The idea behind iShares MSCI EAFE and EA Series Trust 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.