Correlation Between IShares MSCI and Breakwave Dry

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

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

Diversification Opportunities for IShares MSCI and Breakwave Dry

0.81

Correlation Coefficient

IShares MSCI  Breakwave Dry

Very poor diversification

The 3 months correlation between IShares and Breakwave is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Philippines and Breakwave Dry Bulk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Breakwave Dry Bulk 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 Philippines are associated (or correlated) with Breakwave Dry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Breakwave Dry Bulk has no effect on the direction of IShares MSCI i.e., IShares MSCI and Breakwave Dry go up and down completely randomly.

Pair Corralation between IShares MSCI and Breakwave Dry

Given the investment horizon of 90 days iShares MSCI Philippines is expected to generate 0.34 times more return on investment than Breakwave Dry. However, iShares MSCI Philippines is 2.93 times less risky than Breakwave Dry. It trades about -0.06 of its potential returns per unit of risk. Breakwave Dry Bulk is currently generating about -0.05 per unit of risk. If you would invest  2,598  in iShares MSCI Philippines on October 7, 2024 and sell it today you would lose (29.00) from holding iShares MSCI Philippines or give up 1.12% of portfolio value over 90 days.

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

iShares MSCI Philippines  vs.  Breakwave Dry Bulk

iShares MSCI Philippines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Philippines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Breakwave Dry Bulk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Breakwave Dry Bulk 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 fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with IShares MSCI and Breakwave Dry

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

The idea behind iShares MSCI Philippines and Breakwave Dry Bulk 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.