Correlation Between IShares MSCI and Virtus WMC

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

Diversification Opportunities for IShares MSCI and Virtus WMC

0.95

Correlation Coefficient

IShares MSCI  Virtus WMC

Almost no diversification

The 3 months correlation between IShares and Virtus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Virtus WMC International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus WMC International 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 Virtus WMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus WMC International has no effect on the direction of IShares MSCI i.e., IShares MSCI and Virtus WMC go up and down completely randomly.

Pair Corralation between IShares MSCI and Virtus WMC

Given the investment horizon of 90 days iShares MSCI China is expected to generate 2.46 times more return on investment than Virtus WMC. However, IShares MSCI is 2.46 times more volatile than Virtus WMC International. It trades about 0.17 of its potential returns per unit of risk. Virtus WMC International is currently generating about 0.27 per unit of risk. If you would invest  4,695  in iShares MSCI China on December 28, 2024 and sell it today you would earn a total of  886.00  from holding iShares MSCI China or generate 18.87% return on investment over 90 days.

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

iShares MSCI China  vs.  Virtus WMC International

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 13 (%) 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.

Virtus WMC International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus WMC International are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Virtus WMC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares MSCI and Virtus WMC

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

The idea behind iShares MSCI China and Virtus WMC International 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.