Correlation Between IShares India and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both IShares India 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 India 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 India 50 and iShares MSCI India, you can compare the effects of market volatilities on IShares India 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 India with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares India and IShares MSCI.

Diversification Opportunities for IShares India and IShares MSCI

0.94

Correlation Coefficient

IShares India  IShares MSCI

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares India 50 and iShares MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI India and IShares India 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 India 50 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 India has no effect on the direction of IShares India i.e., IShares India and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares India and IShares MSCI

Given the investment horizon of 90 days iShares India 50 is expected to generate 0.5 times more return on investment than IShares MSCI. However, iShares India 50 is 2.02 times less risky than IShares MSCI. It trades about -0.32 of its potential returns per unit of risk. iShares MSCI India is currently generating about -0.29 per unit of risk. If you would invest  5,364  in iShares India 50 on December 5, 2024 and sell it today you would lose (649.00) from holding iShares India 50 or give up 12.1% of portfolio value over 90 days.

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

iShares India 50  vs.  iShares MSCI India

iShares India 50

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares India 50 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

iShares MSCI India

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with IShares India and IShares MSCI

The main advantage of trading using opposite IShares India and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares India 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 India 50 and iShares MSCI India 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.