Correlation Between IShares MSCI and Texas Capital

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

Diversification Opportunities for IShares MSCI and Texas Capital

-0.12

Correlation Coefficient

IShares MSCI  Texas Capital

Good diversification

The 3 months correlation between IShares and Texas is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Texas Capital Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Funds 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Funds has no effect on the direction of IShares MSCI i.e., IShares MSCI and Texas Capital go up and down completely randomly.

Pair Corralation between IShares MSCI and Texas Capital

Given the investment horizon of 90 days iShares MSCI China is expected to generate 1.82 times more return on investment than Texas Capital. However, IShares MSCI is 1.82 times more volatile than Texas Capital Funds. It trades about 0.15 of its potential returns per unit of risk. Texas Capital Funds is currently generating about -0.12 per unit of risk. If you would invest  4,643  in iShares MSCI China on November 28, 2024 and sell it today you would earn a total of  763.00  from holding iShares MSCI China or generate 16.43% 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.  Texas Capital Funds

iShares MSCI China

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 11 (%) 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.

Texas Capital Funds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Capital Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with IShares MSCI and Texas Capital

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

The idea behind iShares MSCI China and Texas Capital Funds 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 Global Correlations module to find global opportunities by holding instruments from different markets.