Correlation Between IShares Core and Deka STOXX

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

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

Diversification Opportunities for IShares Core and Deka STOXX

0.39

Correlation Coefficient

IShares Core  Deka STOXX

Weak diversification

The 3 months correlation between IShares and Deka is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Deka STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka STOXX Europe and IShares Core 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 Core MSCI are associated (or correlated) with Deka STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka STOXX Europe has no effect on the direction of IShares Core i.e., IShares Core and Deka STOXX go up and down completely randomly.

Pair Corralation between IShares Core and Deka STOXX

Assuming the 90 days trading horizon IShares Core is expected to generate 4.83 times less return on investment than Deka STOXX. But when comparing it to its historical volatility, iShares Core MSCI is 1.38 times less risky than Deka STOXX. It trades about 0.02 of its potential returns per unit of risk. Deka STOXX Europe is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,465  in Deka STOXX Europe on October 7, 2024 and sell it today you would earn a total of  326.00  from holding Deka STOXX Europe or generate 13.23% return on investment over 90 days.

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

iShares Core MSCI  vs.  Deka STOXX Europe

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Deka STOXX Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka STOXX Europe has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Deka STOXX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Core and Deka STOXX

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

The idea behind iShares Core MSCI and Deka STOXX Europe 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.