Correlation Between IShares MSCI and SPACE

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

Diversification Opportunities for IShares MSCI and SPACE

0.61

Correlation Coefficient

IShares MSCI  SPACE

Poor diversification

The 3 months correlation between IShares and SPACE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE 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 SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPACE go up and down completely randomly.

Pair Corralation between IShares MSCI and SPACE

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.32 times less return on investment than SPACE. But when comparing it to its historical volatility, iShares MSCI USA is 3.94 times less risky than SPACE. It trades about 0.28 of its potential returns per unit of risk. SPACE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  43.00  in SPACE on October 20, 2024 and sell it today you would earn a total of  3.00  from holding SPACE or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

iShares MSCI USA  vs.  SPACE

iShares MSCI USA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SPACE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and SPACE

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

The idea behind iShares MSCI USA and SPACE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.