Correlation Between Strategy Shares and IShares MSCI

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

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

Diversification Opportunities for Strategy Shares and IShares MSCI

-0.01

Correlation Coefficient

Strategy Shares  IShares MSCI

Good diversification

The 3 months correlation between Strategy and IShares is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging and Strategy Shares 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 Strategy Shares are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Emerging has no effect on the direction of Strategy Shares i.e., Strategy Shares and IShares MSCI go up and down completely randomly.

Pair Corralation between Strategy Shares and IShares MSCI

Given the investment horizon of 90 days Strategy Shares is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Strategy Shares is 1.05 times less risky than IShares MSCI. The etf trades about -0.05 of its potential returns per unit of risk. The iShares MSCI Emerging is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,390  in iShares MSCI Emerging on December 22, 2024 and sell it today you would earn a total of  108.00  from holding iShares MSCI Emerging or generate 4.52% return on investment over 90 days.

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

Strategy Shares  vs.  iShares MSCI Emerging

Strategy Shares

Risk-Adjusted Performance

Very Weak

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

iShares MSCI Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Emerging are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, IShares MSCI is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Strategy Shares and IShares MSCI

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

The idea behind Strategy Shares and iShares MSCI Emerging 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.