Correlation Between IShares MSCI and Guardian Directed

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

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

Diversification Opportunities for IShares MSCI and Guardian Directed

0.23

Correlation Coefficient

IShares MSCI  Guardian Directed

Modest diversification

The 3 months correlation between IShares and Guardian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Guardian Directed Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Directed Premium 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 World are associated (or correlated) with Guardian Directed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Directed Premium has no effect on the direction of IShares MSCI i.e., IShares MSCI and Guardian Directed go up and down completely randomly.

Pair Corralation between IShares MSCI and Guardian Directed

Assuming the 90 days trading horizon iShares MSCI World is expected to generate 1.12 times more return on investment than Guardian Directed. However, IShares MSCI is 1.12 times more volatile than Guardian Directed Premium. It trades about 0.07 of its potential returns per unit of risk. Guardian Directed Premium is currently generating about -0.08 per unit of risk. If you would invest  9,679  in iShares MSCI World on December 1, 2024 and sell it today you would earn a total of  271.00  from holding iShares MSCI World or generate 2.8% return on investment over 90 days.

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

iShares MSCI World  vs.  Guardian Directed Premium

iShares MSCI World

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI World are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Guardian Directed Premium

Risk-Adjusted Performance

Very Weak

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

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

The idea behind iShares MSCI World and Guardian Directed Premium 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.