Correlation Between Downing Strategic and IShares MSCI

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

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

Diversification Opportunities for Downing Strategic and IShares MSCI

-0.52

Correlation Coefficient

Downing Strategic  IShares MSCI

Excellent diversification

The 3 months correlation between Downing and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Downing Strategic Micro Cap and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and Downing Strategic 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 Downing Strategic Micro Cap 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 Japan has no effect on the direction of Downing Strategic i.e., Downing Strategic and IShares MSCI go up and down completely randomly.

Pair Corralation between Downing Strategic and IShares MSCI

Assuming the 90 days trading horizon Downing Strategic Micro Cap is expected to under-perform the IShares MSCI. In addition to that, Downing Strategic is 6.27 times more volatile than iShares MSCI Japan. It trades about -0.01 of its total potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.06 per unit of volatility. If you would invest  492.00  in iShares MSCI Japan on September 12, 2024 and sell it today you would earn a total of  14.00  from holding iShares MSCI Japan or generate 2.85% return on investment over 90 days.

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

Downing Strategic Micro Cap  vs.  iShares MSCI Japan

Downing Strategic Micro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Downing Strategic Micro Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Downing Strategic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares MSCI Japan

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Japan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Downing Strategic and IShares MSCI

The main advantage of trading using opposite Downing Strategic and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Downing Strategic 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 Downing Strategic Micro Cap and iShares MSCI Japan 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.