Correlation Between IShares MSCI and Xtrackers Harvest

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

Diversification Opportunities for IShares MSCI and Xtrackers Harvest

0.79

Correlation Coefficient

IShares MSCI  Xtrackers Harvest

Poor diversification

The 3 months correlation between IShares and Xtrackers is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Xtrackers Harvest CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Harvest CSI 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 Xtrackers Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Harvest CSI has no effect on the direction of IShares MSCI i.e., IShares MSCI and Xtrackers Harvest go up and down completely randomly.

Pair Corralation between IShares MSCI and Xtrackers Harvest

Given the investment horizon of 90 days iShares MSCI China is expected to under-perform the Xtrackers Harvest. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI China is 1.04 times less risky than Xtrackers Harvest. The etf trades about -0.04 of its potential returns per unit of risk. The Xtrackers Harvest CSI is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,906  in Xtrackers Harvest CSI on September 22, 2024 and sell it today you would lose (13.00) from holding Xtrackers Harvest CSI or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

iShares MSCI China  vs.  Xtrackers Harvest CSI

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.

Xtrackers Harvest CSI

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish technical indicators, Xtrackers Harvest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Xtrackers Harvest

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

The idea behind iShares MSCI China and Xtrackers Harvest CSI 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.