Correlation Between IShares MSCI and IShares MSCI

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

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

Diversification Opportunities for IShares MSCI and IShares MSCI

0.7

Correlation Coefficient

IShares MSCI  IShares MSCI

Poor diversification

The 3 months correlation between IShares and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI South and iShares MSCI Peru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Peru 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 South 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 Peru has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares MSCI

Considering the 90-day investment horizon IShares MSCI is expected to generate 2.29 times less return on investment than IShares MSCI. In addition to that, IShares MSCI is 1.33 times more volatile than iShares MSCI Peru. It trades about 0.03 of its total potential returns per unit of risk. iShares MSCI Peru is currently generating about 0.08 per unit of volatility. If you would invest  2,679  in iShares MSCI Peru on September 14, 2024 and sell it today you would earn a total of  1,609  from holding iShares MSCI Peru or generate 60.06% return on investment over 90 days.

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

iShares MSCI South  vs.  iShares MSCI Peru

iShares MSCI South

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI South are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI Peru

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Peru are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares MSCI and IShares MSCI

The main advantage of trading using opposite IShares MSCI and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI South and iShares MSCI Peru 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.