Correlation Between IShares Broad and IShares MSCI

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

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

Diversification Opportunities for IShares Broad and IShares MSCI

0.06

Correlation Coefficient

IShares Broad  IShares MSCI

Significant diversification

The 3 months correlation between IShares and IShares is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad High 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 IShares Broad 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 Broad High 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 IShares Broad i.e., IShares Broad and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Broad and IShares MSCI

Assuming the 90 days trading horizon iShares Broad High is expected to generate 0.2 times more return on investment than IShares MSCI. However, iShares Broad High is 5.12 times less risky than IShares MSCI. It trades about 0.1 of its potential returns per unit of risk. iShares MSCI China is currently generating about 0.0 per unit of risk. If you would invest  506.00  in iShares Broad High on September 28, 2024 and sell it today you would earn a total of  74.00  from holding iShares Broad High or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	88.47%
Values	Daily Returns

iShares Broad High  vs.  iShares MSCI China

iShares Broad High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Broad High has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Broad is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 stable fundamental drivers, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Broad and IShares MSCI

The main advantage of trading using opposite IShares Broad and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad 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 iShares Broad High 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.