Correlation Between IShares MSCI and FT Vest

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

By analyzing existing cross correlation between iShares MSCI EAFE and FT Vest Equity, you can compare the effects of market volatilities on IShares MSCI and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and FT Vest.

Diversification Opportunities for IShares MSCI and FT Vest

0.01

Correlation Coefficient

IShares MSCI  FT Vest

Significant diversification

The 3 months correlation between IShares and DHDG is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity 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 EAFE are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of IShares MSCI i.e., IShares MSCI and FT Vest go up and down completely randomly.

Pair Corralation between IShares MSCI and FT Vest

Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the FT Vest. In addition to that, IShares MSCI is 1.47 times more volatile than FT Vest Equity. It trades about -0.14 of its total potential returns per unit of risk. FT Vest Equity is currently generating about 0.05 per unit of volatility. If you would invest  3,038  in FT Vest Equity on October 7, 2024 and sell it today you would earn a total of  38.00  from holding FT Vest Equity or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.13%
Values	Daily Returns

iShares MSCI EAFE  vs.  FT Vest Equity

iShares MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FT Vest Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, FT Vest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares MSCI and FT Vest

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

The idea behind iShares MSCI EAFE and FT Vest Equity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.