Correlation Between Scottish Mortgage and IShares Edge

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

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

Diversification Opportunities for Scottish Mortgage and IShares Edge

-0.64

Correlation Coefficient

Scottish Mortgage  IShares Edge

Excellent diversification

The 3 months correlation between Scottish and IShares is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Scottish Mortgage Investment and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI and Scottish Mortgage 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 Scottish Mortgage Investment are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Scottish Mortgage i.e., Scottish Mortgage and IShares Edge go up and down completely randomly.

Pair Corralation between Scottish Mortgage and IShares Edge

Assuming the 90 days trading horizon Scottish Mortgage Investment is expected to generate 2.6 times more return on investment than IShares Edge. However, Scottish Mortgage is 2.6 times more volatile than iShares Edge MSCI. It trades about -0.02 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about -0.25 per unit of risk. If you would invest  95,980  in Scottish Mortgage Investment on October 3, 2024 and sell it today you would lose (480.00) from holding Scottish Mortgage Investment or give up 0.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Scottish Mortgage Investment  vs.  iShares Edge MSCI

Scottish Mortgage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Scottish Mortgage may actually be approaching a critical reversion point that can send shares even higher in February 2025.

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IShares Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Scottish Mortgage and IShares Edge

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

The idea behind Scottish Mortgage Investment and iShares Edge MSCI 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.