Correlation Between Pan American and IShares MSCI

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

By analyzing existing cross correlation between Pan American Silver and iShares MSCI Global, you can compare the effects of market volatilities on Pan American and IShares MSCI 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 Pan American with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and IShares MSCI.

Diversification Opportunities for Pan American and IShares MSCI

0.97

Correlation Coefficient

Pan American  IShares MSCI

Almost no diversification

The 3 months correlation between Pan and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global and Pan American 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 Pan American Silver are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Global has no effect on the direction of Pan American i.e., Pan American and IShares MSCI go up and down completely randomly.

Pair Corralation between Pan American and IShares MSCI

Given the investment horizon of 90 days Pan American is expected to generate 1.0 times less return on investment than IShares MSCI. In addition to that, Pan American is 1.06 times more volatile than iShares MSCI Global. It trades about 0.19 of its total potential returns per unit of risk. iShares MSCI Global is currently generating about 0.2 per unit of volatility. If you would invest  1,170  in iShares MSCI Global on December 19, 2024 and sell it today you would earn a total of  362.00  from holding iShares MSCI Global or generate 30.94% return on investment over 90 days.

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

Pan American Silver  vs.  iShares MSCI Global

Pan American Silver

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares MSCI Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IShares MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan American and IShares MSCI

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

The idea behind Pan American Silver and iShares MSCI Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.