Correlation Between ETC On and IShares MSCI

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

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

Diversification Opportunities for ETC On and IShares MSCI

0.13

Correlation Coefficient

ETC On  IShares MSCI

Average diversification

The 3 months correlation between ETC and IShares is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ETC on CMCI and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and ETC On 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 ETC on CMCI 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 Japan has no effect on the direction of ETC On i.e., ETC On and IShares MSCI go up and down completely randomly.

Pair Corralation between ETC On and IShares MSCI

Assuming the 90 days trading horizon ETC on CMCI is expected to generate 0.54 times more return on investment than IShares MSCI. However, ETC on CMCI is 1.86 times less risky than IShares MSCI. It trades about 0.31 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.09 per unit of risk. If you would invest  6,943  in ETC on CMCI on September 5, 2024 and sell it today you would earn a total of  741.00  from holding ETC on CMCI or generate 10.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

ETC on CMCI  vs.  iShares MSCI Japan

ETC on CMCI

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETC on CMCI are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ETC On may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares MSCI Japan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Japan are ranked lower than 6 (%) 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 ETC On and IShares MSCI

The main advantage of trading using opposite ETC On and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC On 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 ETC on CMCI and iShares MSCI Japan 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.