Correlation Between IShares Property and IShares MSCI

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

Diversification Opportunities for IShares Property and IShares MSCI

0.84

Correlation Coefficient

IShares Property  IShares MSCI

Very poor diversification

The 3 months correlation between IShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Property Yield and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA and IShares Property 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 Property Yield 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 USA has no effect on the direction of IShares Property i.e., IShares Property and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Property and IShares MSCI

Assuming the 90 days trading horizon IShares Property is expected to generate 2.58 times less return on investment than IShares MSCI. In addition to that, IShares Property is 1.41 times more volatile than iShares MSCI USA. It trades about 0.03 of its total potential returns per unit of risk. iShares MSCI USA is currently generating about 0.11 per unit of volatility. If you would invest  1,110  in iShares MSCI USA on September 16, 2024 and sell it today you would earn a total of  14.00  from holding iShares MSCI USA or generate 1.26% return on investment over 90 days.

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

iShares Property Yield  vs.  iShares MSCI USA

iShares Property Yield

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Property Yield are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Property is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI USA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Property and IShares MSCI

The main advantage of trading using opposite IShares Property and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Property 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 Property Yield and iShares MSCI USA 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.