Correlation Between Pershing Square and IShares MSCI

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

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

Diversification Opportunities for Pershing Square and IShares MSCI

0.58

Correlation Coefficient

Pershing Square  IShares MSCI

Very weak diversification

The 3 months correlation between Pershing and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and iShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Europe and Pershing Square 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 Pershing Square Holdings 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 Europe has no effect on the direction of Pershing Square i.e., Pershing Square and IShares MSCI go up and down completely randomly.

Pair Corralation between Pershing Square and IShares MSCI

Assuming the 90 days trading horizon Pershing Square Holdings is expected to generate 1.66 times more return on investment than IShares MSCI. However, Pershing Square is 1.66 times more volatile than iShares MSCI Europe. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI Europe is currently generating about -0.05 per unit of risk. If you would invest  4,790  in Pershing Square Holdings on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Pershing Square Holdings or generate 0.0% return on investment over 90 days.

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

Pershing Square Holdings  vs.  iShares MSCI Europe

Pershing Square Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pershing Square Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Pershing Square is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Pershing Square and IShares MSCI

The main advantage of trading using opposite Pershing Square and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pershing Square 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 Pershing Square Holdings and iShares MSCI Europe 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.