Correlation Between IShares VII and SPDR MSCI

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

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

Diversification Opportunities for IShares VII and SPDR MSCI

0.69

Correlation Coefficient

IShares VII  SPDR MSCI

Poor diversification

The 3 months correlation between IShares and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and SPDR MSCI EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI EM and IShares VII 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 VII PLC are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI EM has no effect on the direction of IShares VII i.e., IShares VII and SPDR MSCI go up and down completely randomly.

Pair Corralation between IShares VII and SPDR MSCI

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 0.94 times more return on investment than SPDR MSCI. However, iShares VII PLC is 1.06 times less risky than SPDR MSCI. It trades about 0.13 of its potential returns per unit of risk. SPDR MSCI EM is currently generating about 0.11 per unit of risk. If you would invest  3,646,500  in iShares VII PLC on September 14, 2024 and sell it today you would earn a total of  343,500  from holding iShares VII PLC or generate 9.42% return on investment over 90 days.

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

iShares VII PLC  vs.  SPDR MSCI EM

iShares VII PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, IShares VII may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SPDR MSCI EM

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI EM are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SPDR MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares VII and SPDR MSCI

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

The idea behind iShares VII PLC and SPDR MSCI EM 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.