Correlation Between IShares MSCI and SWP Growth

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

Diversification Opportunities for IShares MSCI and SWP Growth

0.95

Correlation Coefficient

IShares MSCI  SWP Growth

Almost no diversification

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

Pair Corralation between IShares MSCI and SWP Growth

Given the investment horizon of 90 days iShares MSCI USA is expected to generate 1.32 times more return on investment than SWP Growth. However, IShares MSCI is 1.32 times more volatile than SWP Growth Income. It trades about 0.08 of its potential returns per unit of risk. SWP Growth Income is currently generating about 0.06 per unit of risk. If you would invest  20,160  in iShares MSCI USA on October 6, 2024 and sell it today you would earn a total of  966.00  from holding iShares MSCI USA or generate 4.79% 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 USA  vs.  SWP Growth Income

iShares MSCI USA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 6 (%) 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.

SWP Growth Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares MSCI and SWP Growth

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

The idea behind iShares MSCI USA and SWP Growth Income 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.