Correlation Between IShares MSCI and Wasatch Emerging

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

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

Diversification Opportunities for IShares MSCI and Wasatch Emerging

0.93

Correlation Coefficient

IShares MSCI  Wasatch Emerging

Almost no diversification

The 3 months correlation between IShares and Wasatch is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI India and Wasatch Emerging India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Emerging India 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 India are associated (or correlated) with Wasatch Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Emerging India has no effect on the direction of IShares MSCI i.e., IShares MSCI and Wasatch Emerging go up and down completely randomly.

Pair Corralation between IShares MSCI and Wasatch Emerging

Given the investment horizon of 90 days iShares MSCI India is expected to under-perform the Wasatch Emerging. In addition to that, IShares MSCI is 1.12 times more volatile than Wasatch Emerging India. It trades about -0.01 of its total potential returns per unit of risk. Wasatch Emerging India is currently generating about -0.01 per unit of volatility. If you would invest  699.00  in Wasatch Emerging India on September 2, 2024 and sell it today you would lose (7.00) from holding Wasatch Emerging India or give up 1.0% of portfolio value over 90 days.

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

iShares MSCI India  vs.  Wasatch Emerging India

iShares MSCI India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Wasatch Emerging India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Emerging India has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wasatch Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Wasatch Emerging

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

The idea behind iShares MSCI India and Wasatch Emerging India 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.