Correlation Between IShares MSCI and Evolve Global

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

Diversification Opportunities for IShares MSCI and Evolve Global

0.83

Correlation Coefficient

IShares MSCI  Evolve Global

Very poor diversification

The 3 months correlation between IShares and Evolve is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Min and Evolve Global Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Global Materials 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 Evolve Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Global Materials has no effect on the direction of IShares MSCI i.e., IShares MSCI and Evolve Global go up and down completely randomly.

Pair Corralation between IShares MSCI and Evolve Global

Assuming the 90 days trading horizon iShares MSCI Min is expected to generate 0.44 times more return on investment than Evolve Global. However, iShares MSCI Min is 2.27 times less risky than Evolve Global. It trades about 0.08 of its potential returns per unit of risk. Evolve Global Materials is currently generating about -0.04 per unit of risk. If you would invest  3,164  in iShares MSCI Min on December 11, 2024 and sell it today you would earn a total of  66.00  from holding iShares MSCI Min or generate 2.09% return on investment over 90 days.

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

iShares MSCI Min  vs.  Evolve Global Materials

iShares MSCI Min

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Min are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Evolve Global Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolve Global Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolve Global 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 Evolve Global

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

The idea behind iShares MSCI Min and Evolve Global Materials 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.