Correlation Between IShares MSCI and Alger 35

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Alger 35 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 Alger 35 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares MSCI USA and Alger 35 ETF, you can compare the effects of market volatilities on IShares MSCI and Alger 35 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 Alger 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Alger 35.

Diversification Opportunities for IShares MSCI and Alger 35

0.7

Correlation Coefficient

IShares MSCI  Alger 35

Poor diversification

The 3 months correlation between IShares and Alger is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Alger 35 ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger 35 ETF 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 USA are associated (or correlated) with Alger 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger 35 ETF has no effect on the direction of IShares MSCI i.e., IShares MSCI and Alger 35 go up and down completely randomly.

Pair Corralation between IShares MSCI and Alger 35

Given the investment horizon of 90 days iShares MSCI USA is expected to generate 0.5 times more return on investment than Alger 35. However, iShares MSCI USA is 2.02 times less risky than Alger 35. It trades about 0.15 of its potential returns per unit of risk. Alger 35 ETF is currently generating about 0.05 per unit of risk. If you would invest  22,077  in iShares MSCI USA on November 19, 2024 and sell it today you would earn a total of  753.00  from holding iShares MSCI USA or generate 3.41% return on investment over 90 days.

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

iShares MSCI USA  vs.  Alger 35 ETF

iShares MSCI USA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Alger 35 ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alger 35 ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Alger 35 showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Alger 35

The main advantage of trading using opposite IShares MSCI and Alger 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Alger 35 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 Alger 35 will offset losses from the drop in Alger 35's long position.

The idea behind iShares MSCI USA and Alger 35 ETF 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.