Correlation Between IShares VII and Xtrackers MSCI

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

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

Diversification Opportunities for IShares VII and Xtrackers MSCI

0.46

Correlation Coefficient

IShares VII  Xtrackers MSCI

Very weak diversification

The 3 months correlation between IShares and Xtrackers is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Xtrackers MSCI Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Pakistan and IShares VII 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 VII PLC are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Pakistan has no effect on the direction of IShares VII i.e., IShares VII and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between IShares VII and Xtrackers MSCI

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 0.57 times more return on investment than Xtrackers MSCI. However, iShares VII PLC is 1.74 times less risky than Xtrackers MSCI. It trades about -0.12 of its potential returns per unit of risk. Xtrackers MSCI Pakistan is currently generating about -0.08 per unit of risk. If you would invest  24,315  in iShares VII PLC on December 31, 2024 and sell it today you would lose (1,715) from holding iShares VII PLC or give up 7.05% of portfolio value over 90 days.

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

iShares VII PLC  vs.  Xtrackers MSCI Pakistan

iShares VII PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares VII PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Xtrackers MSCI Pakistan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtrackers MSCI Pakistan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with IShares VII and Xtrackers MSCI

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

The idea behind iShares VII PLC and Xtrackers MSCI Pakistan 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.