Correlation Between IShares MSCI and ALPS International

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

Diversification Opportunities for IShares MSCI and ALPS International

0.98

Correlation Coefficient

IShares MSCI  ALPS International

Almost no diversification

The 3 months correlation between IShares and ALPS is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and ALPS International Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS International Sector 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 ALPS International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS International Sector has no effect on the direction of IShares MSCI i.e., IShares MSCI and ALPS International go up and down completely randomly.

Pair Corralation between IShares MSCI and ALPS International

Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 0.91 times more return on investment than ALPS International. However, iShares MSCI EAFE is 1.1 times less risky than ALPS International. It trades about 0.26 of its potential returns per unit of risk. ALPS International Sector is currently generating about 0.21 per unit of risk. If you would invest  5,265  in iShares MSCI EAFE on December 26, 2024 and sell it today you would earn a total of  717.00  from holding iShares MSCI EAFE or generate 13.62% 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.  ALPS International Sector

iShares MSCI EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, IShares MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

ALPS International Sector

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ALPS International Sector are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALPS International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares MSCI and ALPS International

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

The idea behind iShares MSCI EAFE and ALPS International Sector 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.