Correlation Between IShares MSCI and IShares Future

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

Diversification Opportunities for IShares MSCI and IShares Future

-0.08

Correlation Coefficient

IShares MSCI  IShares Future

Good diversification

The 3 months correlation between IShares and IShares is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and iShares Future AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Future AI 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 IShares Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Future AI has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Future go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Future

Given the investment horizon of 90 days iShares MSCI China is expected to under-perform the IShares Future. In addition to that, IShares MSCI is 1.59 times more volatile than iShares Future AI. It trades about -0.03 of its total potential returns per unit of risk. iShares Future AI is currently generating about 0.32 per unit of volatility. If you would invest  3,529  in iShares Future AI on September 19, 2024 and sell it today you would earn a total of  339.00  from holding iShares Future AI or generate 9.61% return on investment over 90 days.

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

iShares MSCI China  vs.  iShares Future AI

iShares MSCI China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

iShares Future AI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Future AI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Future showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and IShares Future

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

The idea behind iShares MSCI China and iShares Future AI 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.