Correlation Between IShares MSCI and ANZ SP

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

By analyzing existing cross correlation between iShares MSCI Emerging and ANZ SP 500, you can compare the effects of market volatilities on IShares MSCI and ANZ SP 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 ANZ SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and ANZ SP.

Diversification Opportunities for IShares MSCI and ANZ SP

-0.38

Correlation Coefficient

IShares MSCI  ANZ SP

Very good diversification

The 3 months correlation between IShares and ANZ is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and ANZ SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANZ SP 500 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 Emerging are associated (or correlated) with ANZ SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANZ SP 500 has no effect on the direction of IShares MSCI i.e., IShares MSCI and ANZ SP go up and down completely randomly.

Pair Corralation between IShares MSCI and ANZ SP

Assuming the 90 days trading horizon iShares MSCI Emerging is expected to under-perform the ANZ SP. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Emerging is 1.57 times less risky than ANZ SP. The etf trades about -0.12 of its potential returns per unit of risk. The ANZ SP 500 is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,584  in ANZ SP 500 on October 12, 2024 and sell it today you would lose (16.00) from holding ANZ SP 500 or give up 1.01% of portfolio value over 90 days.

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

iShares MSCI Emerging  vs.  ANZ SP 500

iShares MSCI Emerging

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ANZ SP 500

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANZ SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ANZ SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares MSCI and ANZ SP

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

The idea behind iShares MSCI Emerging and ANZ SP 500 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.