Correlation Between IShares MSCI and Via Renewables

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

Diversification Opportunities for IShares MSCI and Via Renewables

0.56

Correlation Coefficient

IShares MSCI  Via Renewables

Very weak diversification

The 3 months correlation between IShares and Via is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of IShares MSCI i.e., IShares MSCI and Via Renewables go up and down completely randomly.

Pair Corralation between IShares MSCI and Via Renewables

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.08 times less return on investment than Via Renewables. But when comparing it to its historical volatility, iShares MSCI USA is 1.91 times less risky than Via Renewables. It trades about 0.11 of its potential returns per unit of risk. Via Renewables is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Via Renewables on October 5, 2024 and sell it today you would earn a total of  603.00  from holding Via Renewables or generate 35.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

iShares MSCI USA  vs.  Via Renewables

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.

Via Renewables

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Via Renewables

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

The idea behind iShares MSCI USA and Via Renewables 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.