Correlation Between Xtrackers MSCI and IShares Trust

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

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

Diversification Opportunities for Xtrackers MSCI and IShares Trust

-0.6

Correlation Coefficient

Xtrackers MSCI  IShares Trust

Excellent diversification

The 3 months correlation between Xtrackers and IShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Emerging and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Xtrackers 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 Xtrackers MSCI Emerging are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and IShares Trust go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and IShares Trust

Given the investment horizon of 90 days Xtrackers MSCI Emerging is expected to generate 0.78 times more return on investment than IShares Trust. However, Xtrackers MSCI Emerging is 1.28 times less risky than IShares Trust. It trades about 0.05 of its potential returns per unit of risk. iShares Trust is currently generating about -0.21 per unit of risk. If you would invest  2,770  in Xtrackers MSCI Emerging on December 30, 2024 and sell it today you would earn a total of  36.00  from holding Xtrackers MSCI Emerging or generate 1.3% return on investment over 90 days.

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

Xtrackers MSCI Emerging  vs.  iShares Trust

Xtrackers MSCI Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Emerging are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Xtrackers MSCI and IShares Trust

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

The idea behind Xtrackers MSCI Emerging and iShares 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.