Correlation Between IShares MSCI and IShares Dividend

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

By analyzing existing cross correlation between iShares MSCI Min and iShares Dividend Growers, you can compare the effects of market volatilities on IShares MSCI and IShares Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Dividend.

Diversification Opportunities for IShares MSCI and IShares Dividend

0.57

Correlation Coefficient

IShares MSCI  IShares Dividend

Very weak diversification

The 3 months correlation between IShares and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Min and iShares Dividend Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dividend Growers 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 Min are associated (or correlated) with IShares Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dividend Growers has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Dividend go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Dividend

Assuming the 90 days trading horizon iShares MSCI Min is expected to generate 1.12 times more return on investment than IShares Dividend. However, IShares MSCI is 1.12 times more volatile than iShares Dividend Growers. It trades about 0.18 of its potential returns per unit of risk. iShares Dividend Growers is currently generating about 0.09 per unit of risk. If you would invest  8,219  in iShares MSCI Min on September 3, 2024 and sell it today you would earn a total of  653.00  from holding iShares MSCI Min or generate 7.95% return on investment over 90 days.

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

iShares MSCI Min  vs.  iShares Dividend Growers

iShares MSCI Min

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Min are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Dividend Growers

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Dividend Growers are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and IShares Dividend

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

The idea behind iShares MSCI Min and iShares Dividend Growers 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.