Correlation Between IShares MSCI and Franklin FTSE

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

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

Diversification Opportunities for IShares MSCI and Franklin FTSE

0.44

Correlation Coefficient

IShares MSCI  Franklin FTSE

Very weak diversification

The 3 months correlation between IShares and Franklin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Hong and Franklin FTSE South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE South 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 Hong are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE South has no effect on the direction of IShares MSCI i.e., IShares MSCI and Franklin FTSE go up and down completely randomly.

Pair Corralation between IShares MSCI and Franklin FTSE

Considering the 90-day investment horizon IShares MSCI is expected to generate 1.18 times less return on investment than Franklin FTSE. But when comparing it to its historical volatility, iShares MSCI Hong is 1.26 times less risky than Franklin FTSE. It trades about 0.08 of its potential returns per unit of risk. Franklin FTSE South is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,752  in Franklin FTSE South on December 29, 2024 and sell it today you would earn a total of  113.00  from holding Franklin FTSE South or generate 6.45% return on investment over 90 days.

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

iShares MSCI Hong  vs.  Franklin FTSE South

iShares MSCI Hong

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Hong are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Franklin FTSE South

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE South are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Franklin FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares MSCI and Franklin FTSE

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

The idea behind iShares MSCI Hong and Franklin FTSE South 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.