Correlation Between IShares MSCI and IShares Factors

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

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

Diversification Opportunities for IShares MSCI and IShares Factors

0.0

Correlation Coefficient

IShares MSCI  IShares Factors

Pay attention - limited upside

The 3 months correlation between IShares and IShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and iShares Factors Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Factors Growth 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 USA are associated (or correlated) with IShares Factors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Factors Growth has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Factors go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Factors

If you would invest  4,116  in iShares MSCI USA on December 29, 2024 and sell it today you would earn a total of  39.00  from holding iShares MSCI USA or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

iShares MSCI USA  vs.  iShares Factors Growth

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, IShares MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Factors Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Factors Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, IShares Factors 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 IShares Factors

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

The idea behind iShares MSCI USA and iShares Factors Growth 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.