Correlation Between IShares MSCI and Distillate Fundamental

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Distillate Fundamental 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 Distillate Fundamental 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 Distillate Fundamental Stability, you can compare the effects of market volatilities on IShares MSCI and Distillate Fundamental 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 Distillate Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Distillate Fundamental.

Diversification Opportunities for IShares MSCI and Distillate Fundamental

0.6

Correlation Coefficient

IShares MSCI  Distillate Fundamental

Poor diversification

The 3 months correlation between IShares and Distillate is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and Distillate Fundamental Stabili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distillate Fundamental 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 Distillate Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distillate Fundamental has no effect on the direction of IShares MSCI i.e., IShares MSCI and Distillate Fundamental go up and down completely randomly.

Pair Corralation between IShares MSCI and Distillate Fundamental

Given the investment horizon of 90 days iShares MSCI Intl is expected to generate 1.07 times more return on investment than Distillate Fundamental. However, IShares MSCI is 1.07 times more volatile than Distillate Fundamental Stability. It trades about 0.11 of its potential returns per unit of risk. Distillate Fundamental Stability is currently generating about -0.11 per unit of risk. If you would invest  3,850  in iShares MSCI Intl on November 28, 2024 and sell it today you would earn a total of  183.00  from holding iShares MSCI Intl or generate 4.75% 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.  Distillate Fundamental Stabili

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 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Distillate Fundamental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Distillate Fundamental Stability has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Distillate Fundamental is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares MSCI and Distillate Fundamental

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

The idea behind iShares MSCI Intl and Distillate Fundamental Stability 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.