Correlation Between IShares MSCI and Value8 NV

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Value8 NV 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 Value8 NV 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 Value8 NV, you can compare the effects of market volatilities on IShares MSCI and Value8 NV 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 Value8 NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Value8 NV.

Diversification Opportunities for IShares MSCI and Value8 NV

0.62

Correlation Coefficient

IShares MSCI  Value8 NV

Poor diversification

The 3 months correlation between IShares and Value8 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Value8 NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value8 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 Value8 NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value8 NV has no effect on the direction of IShares MSCI i.e., IShares MSCI and Value8 NV go up and down completely randomly.

Pair Corralation between IShares MSCI and Value8 NV

Assuming the 90 days trading horizon IShares MSCI is expected to generate 2.77 times less return on investment than Value8 NV. But when comparing it to its historical volatility, iShares MSCI USA is 2.62 times less risky than Value8 NV. It trades about 0.11 of its potential returns per unit of risk. Value8 NV is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  556.00  in Value8 NV on September 16, 2024 and sell it today you would earn a total of  19.00  from holding Value8 NV or generate 3.42% return on investment over 90 days.

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

iShares MSCI USA  vs.  Value8 NV

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.

Value8 NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Value8 NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Value8 NV 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 Value8 NV

The main advantage of trading using opposite IShares MSCI and Value8 NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Value8 NV 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 Value8 NV will offset losses from the drop in Value8 NV's long position.

The idea behind iShares MSCI USA and Value8 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.