Correlation Between Avantis International and IShares MSCI

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

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

Diversification Opportunities for Avantis International and IShares MSCI

0.84

Correlation Coefficient

Avantis International  IShares MSCI

Very poor diversification

The 3 months correlation between Avantis and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Avantis International Large and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and Avantis International 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 Avantis International Large 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 EAFE has no effect on the direction of Avantis International i.e., Avantis International and IShares MSCI go up and down completely randomly.

Pair Corralation between Avantis International and IShares MSCI

Given the investment horizon of 90 days Avantis International Large is expected to generate 1.04 times more return on investment than IShares MSCI. However, Avantis International is 1.04 times more volatile than iShares MSCI EAFE. It trades about 0.0 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.05 per unit of risk. If you would invest  5,428  in Avantis International Large on September 5, 2024 and sell it today you would lose (1.00) from holding Avantis International Large or give up 0.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Avantis International Large  vs.  iShares MSCI EAFE

Avantis International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis International Large has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Avantis International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Avantis International and IShares MSCI

The main advantage of trading using opposite Avantis International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis International 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 Avantis International Large and iShares MSCI EAFE 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.