Correlation Between IShares MSCI and NN Group

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

Diversification Opportunities for IShares MSCI and NN Group

-0.69

Correlation Coefficient

IShares MSCI  NN Group

Excellent diversification

The 3 months correlation between IShares and NN Group is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and NN Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NN Group NV 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 NN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NN Group NV has no effect on the direction of IShares MSCI i.e., IShares MSCI and NN Group go up and down completely randomly.

Pair Corralation between IShares MSCI and NN Group

Assuming the 90 days trading horizon iShares MSCI USA is expected to under-perform the NN Group. In addition to that, IShares MSCI is 1.02 times more volatile than NN Group NV. It trades about -0.08 of its total potential returns per unit of risk. NN Group NV is currently generating about 0.31 per unit of volatility. If you would invest  4,180  in NN Group NV on December 30, 2024 and sell it today you would earn a total of  978.00  from holding NN Group NV or generate 23.4% return on investment over 90 days.

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

iShares MSCI USA  vs.  NN Group NV

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

NN Group NV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NN Group NV are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NN Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and NN Group

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

The idea behind iShares MSCI USA and NN Group NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.