Correlation Between Xtrackers MSCI and IShares ESG

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

Diversification Opportunities for Xtrackers MSCI and IShares ESG

0.27

Correlation Coefficient

Xtrackers MSCI  IShares ESG

Modest diversification

The 3 months correlation between Xtrackers and IShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Emerging and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and IShares ESG go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and IShares ESG

Given the investment horizon of 90 days Xtrackers MSCI Emerging is expected to generate 1.64 times more return on investment than IShares ESG. However, Xtrackers MSCI is 1.64 times more volatile than iShares ESG Aware. It trades about 0.09 of its potential returns per unit of risk. iShares ESG Aware is currently generating about 0.03 per unit of risk. If you would invest  2,627  in Xtrackers MSCI Emerging on December 30, 2024 and sell it today you would earn a total of  179.00  from holding Xtrackers MSCI Emerging or generate 6.81% return on investment over 90 days.

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

Xtrackers MSCI Emerging  vs.  iShares ESG Aware

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 ESG Aware

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares ESG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xtrackers MSCI and IShares ESG

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

The idea behind Xtrackers MSCI Emerging and iShares ESG Aware 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.