Correlation Between IShares MSCI and REX AI

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

By analyzing existing cross correlation between iShares MSCI China and REX AI Equity, you can compare the effects of market volatilities on IShares MSCI and REX AI 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 REX AI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and REX AI.

Diversification Opportunities for IShares MSCI and REX AI

-0.58

Correlation Coefficient

IShares MSCI  REX AI

Excellent diversification

The 3 months correlation between IShares and REX is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and REX AI Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX AI Equity 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 China are associated (or correlated) with REX AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX AI Equity has no effect on the direction of IShares MSCI i.e., IShares MSCI and REX AI go up and down completely randomly.

Pair Corralation between IShares MSCI and REX AI

Given the investment horizon of 90 days iShares MSCI China is expected to under-perform the REX AI. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI China is 1.1 times less risky than REX AI. The etf trades about -0.31 of its potential returns per unit of risk. The REX AI Equity is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  5,054  in REX AI Equity on October 15, 2024 and sell it today you would lose (155.00) from holding REX AI Equity or give up 3.07% of portfolio value over 90 days.

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

iShares MSCI China  vs.  REX AI Equity

iShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

REX AI Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in REX AI Equity are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, REX AI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and REX AI

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

The idea behind iShares MSCI China and REX AI Equity 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.