Correlation Between IShares MSCI and IShares Emerging

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

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

Diversification Opportunities for IShares MSCI and IShares Emerging

0.68

Correlation Coefficient

IShares MSCI  IShares Emerging

Poor diversification

The 3 months correlation between IShares and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI New and iShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emerging Markets 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 New are associated (or correlated) with IShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emerging Markets has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Emerging go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Emerging

Given the investment horizon of 90 days iShares MSCI New is expected to under-perform the IShares Emerging. In addition to that, IShares MSCI is 1.03 times more volatile than iShares Emerging Markets. It trades about -0.01 of its total potential returns per unit of risk. iShares Emerging Markets is currently generating about 0.01 per unit of volatility. If you would invest  2,054  in iShares Emerging Markets on October 7, 2024 and sell it today you would earn a total of  6.00  from holding iShares Emerging Markets or generate 0.29% return on investment over 90 days.

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

iShares MSCI New  vs.  iShares Emerging Markets

iShares MSCI New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Etf's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with IShares MSCI and IShares Emerging

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

The idea behind iShares MSCI New and iShares Emerging Markets 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.