Correlation Between IShares MSCI and IShares Latin

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

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

Diversification Opportunities for IShares MSCI and IShares Latin

0.91

Correlation Coefficient

IShares MSCI  IShares Latin

Almost no diversification

The 3 months correlation between IShares and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Brazil and iShares Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Latin America 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 Brazil are associated (or correlated) with IShares Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Latin America has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Latin go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Latin

Given the investment horizon of 90 days iShares MSCI Brazil is expected to generate 1.55 times more return on investment than IShares Latin. However, IShares MSCI is 1.55 times more volatile than iShares Latin America. It trades about -0.09 of its potential returns per unit of risk. iShares Latin America is currently generating about -0.15 per unit of risk. If you would invest  1,252  in iShares MSCI Brazil on August 30, 2024 and sell it today you would lose (114.00) from holding iShares MSCI Brazil or give up 9.11% of portfolio value over 90 days.

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

iShares MSCI Brazil  vs.  iShares Latin America

iShares MSCI Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

iShares Latin America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Latin America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with IShares MSCI and IShares Latin

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

The idea behind iShares MSCI Brazil and iShares Latin America 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.