Correlation Between IShares Morningstar and IShares MSCI

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

Diversification Opportunities for IShares Morningstar and IShares MSCI

0.36

Correlation Coefficient

IShares Morningstar  IShares MSCI

Weak diversification

The 3 months correlation between IShares and IShares is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares Morningstar Small Cap and iShares MSCI Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Intl and IShares Morningstar 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 Morningstar Small Cap 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 Intl has no effect on the direction of IShares Morningstar i.e., IShares Morningstar and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Morningstar and IShares MSCI

Given the investment horizon of 90 days iShares Morningstar Small Cap is expected to generate 1.16 times more return on investment than IShares MSCI. However, IShares Morningstar is 1.16 times more volatile than iShares MSCI Intl. It trades about 0.12 of its potential returns per unit of risk. iShares MSCI Intl is currently generating about 0.09 per unit of risk. If you would invest  6,413  in iShares Morningstar Small Cap on October 26, 2024 and sell it today you would earn a total of  128.00  from holding iShares Morningstar Small Cap or generate 2.0% return on investment over 90 days.

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

iShares Morningstar Small Cap  vs.  iShares MSCI Intl

iShares Morningstar

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares Morningstar is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares MSCI Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Intl has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, IShares MSCI 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 Morningstar and IShares MSCI

The main advantage of trading using opposite IShares Morningstar and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Morningstar 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 Morningstar Small Cap and iShares MSCI Intl 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.