Correlation Between IShares MSCI and Litman Gregory

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

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

Diversification Opportunities for IShares MSCI and Litman Gregory

0.67

Correlation Coefficient

IShares MSCI  Litman Gregory

Poor diversification

The 3 months correlation between IShares and Litman is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds 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 Intl are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of IShares MSCI i.e., IShares MSCI and Litman Gregory go up and down completely randomly.

Pair Corralation between IShares MSCI and Litman Gregory

Given the investment horizon of 90 days iShares MSCI Intl is expected to generate 0.93 times more return on investment than Litman Gregory. However, iShares MSCI Intl is 1.08 times less risky than Litman Gregory. It trades about 0.12 of its potential returns per unit of risk. Litman Gregory Funds is currently generating about 0.03 per unit of risk. If you would invest  3,747  in iShares MSCI Intl on December 29, 2024 and sell it today you would earn a total of  263.00  from holding iShares MSCI Intl or generate 7.02% return on investment over 90 days.

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

iShares MSCI Intl  vs.  Litman Gregory Funds

iShares MSCI Intl

Risk-Adjusted Performance

OK

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

Litman Gregory Funds

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Litman Gregory Funds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Litman Gregory is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares MSCI and Litman Gregory

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

The idea behind iShares MSCI Intl and Litman Gregory Funds 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.