Correlation Between IShares MSCI and IShares Property

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Property 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 Property 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 Property Yield, you can compare the effects of market volatilities on IShares MSCI and IShares Property 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 Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Property.

Diversification Opportunities for IShares MSCI and IShares Property

0.84

Correlation Coefficient

IShares MSCI  IShares Property

Very poor diversification

The 3 months correlation between IShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and iShares Property Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Property Yield 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 Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Property Yield has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Property go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Property

Assuming the 90 days trading horizon iShares MSCI USA is expected to generate 0.87 times more return on investment than IShares Property. However, iShares MSCI USA is 1.15 times less risky than IShares Property. It trades about 0.14 of its potential returns per unit of risk. iShares Property Yield is currently generating about 0.05 per unit of risk. If you would invest  1,057  in iShares MSCI USA on September 16, 2024 and sell it today you would earn a total of  67.00  from holding iShares MSCI USA or generate 6.34% return on investment over 90 days.

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

iShares MSCI USA  vs.  iShares Property Yield

iShares MSCI USA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Property Yield

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Property Yield are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Property is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares MSCI and IShares Property

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

The idea behind iShares MSCI USA and iShares Property Yield 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.