Correlation Between Xtrackers and IShares MSCI

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

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

Diversification Opportunities for Xtrackers and IShares MSCI

-0.21

Correlation Coefficient

Xtrackers  IShares MSCI

Very good diversification

The 3 months correlation between Xtrackers and IShares is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China and Xtrackers 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 Xtrackers II are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI China has no effect on the direction of Xtrackers i.e., Xtrackers and IShares MSCI go up and down completely randomly.

Pair Corralation between Xtrackers and IShares MSCI

Assuming the 90 days trading horizon Xtrackers is expected to generate 3.23 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Xtrackers II is 2.81 times less risky than IShares MSCI. It trades about 0.06 of its potential returns per unit of risk. iShares MSCI China is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  375.00  in iShares MSCI China on September 29, 2024 and sell it today you would earn a total of  71.00  from holding iShares MSCI China or generate 18.93% return on investment over 90 days.

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

Xtrackers II   vs.  iShares MSCI China

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares MSCI China

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xtrackers and IShares MSCI

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

The idea behind Xtrackers II and iShares MSCI China 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..