Correlation Between IShares MSCI and IShares USD

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

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

Diversification Opportunities for IShares MSCI and IShares USD

0.82

Correlation Coefficient

IShares MSCI  IShares USD

Very poor diversification

The 3 months correlation between IShares and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and iShares USD Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares USD Green 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 Global are associated (or correlated) with IShares USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares USD Green has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares USD go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares USD

Considering the 90-day investment horizon IShares MSCI is expected to generate 1.21 times less return on investment than IShares USD. In addition to that, IShares MSCI is 4.07 times more volatile than iShares USD Green. It trades about 0.03 of its total potential returns per unit of risk. iShares USD Green is currently generating about 0.14 per unit of volatility. If you would invest  4,635  in iShares USD Green on December 29, 2024 and sell it today you would earn a total of  86.00  from holding iShares USD Green or generate 1.86% return on investment over 90 days.

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

iShares MSCI Global  vs.  iShares USD Green

iShares MSCI Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares USD Green

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares USD Green are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares USD is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and IShares USD

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

The idea behind iShares MSCI Global and iShares USD Green 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 Anywhere module to track or share privately all of your investments from the convenience of any device.