Correlation Between IShares MSCI and IShares AsiaPacific

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

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

Diversification Opportunities for IShares MSCI and IShares AsiaPacific

0.27

Correlation Coefficient

IShares MSCI  IShares AsiaPacific

Modest diversification

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

Pair Corralation between IShares MSCI and IShares AsiaPacific

Considering the 90-day investment horizon iShares MSCI Sweden is expected to generate 1.67 times more return on investment than IShares AsiaPacific. However, IShares MSCI is 1.67 times more volatile than iShares AsiaPacific Dividend. It trades about 0.12 of its potential returns per unit of risk. iShares AsiaPacific Dividend is currently generating about -0.1 per unit of risk. If you would invest  4,005  in iShares MSCI Sweden on December 5, 2024 and sell it today you would earn a total of  327.00  from holding iShares MSCI Sweden or generate 8.16% return on investment over 90 days.

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

iShares MSCI Sweden  vs.  iShares AsiaPacific Dividend

iShares MSCI Sweden

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Sweden are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares AsiaPacific

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares AsiaPacific Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and IShares AsiaPacific

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

The idea behind iShares MSCI Sweden and iShares AsiaPacific Dividend 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.