Correlation Between IShares MSCI and Columbia

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

Diversification Opportunities for IShares MSCI and Columbia

0.95

Correlation Coefficient

IShares MSCI  Columbia

Almost no diversification

The 3 months correlation between IShares and Columbia is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and Columbia EM Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia EM Core 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 Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia EM Core has no effect on the direction of IShares MSCI i.e., IShares MSCI and Columbia go up and down completely randomly.

Pair Corralation between IShares MSCI and Columbia

Given the investment horizon of 90 days iShares MSCI Emerging is expected to under-perform the Columbia. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Emerging is 1.01 times less risky than Columbia. The etf trades about -0.01 of its potential returns per unit of risk. The Columbia EM Core is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,971  in Columbia EM Core on December 29, 2024 and sell it today you would lose (10.00) from holding Columbia EM Core or give up 0.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

iShares MSCI Emerging  vs.  Columbia EM Core

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 rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Columbia EM Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia EM Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Columbia is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Columbia

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

The idea behind iShares MSCI Emerging and Columbia EM Core 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.