Correlation Between IShares MSCI and AB Active

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

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

Diversification Opportunities for IShares MSCI and AB Active

0.81

Correlation Coefficient

IShares MSCI  AB Active

Very poor diversification

The 3 months correlation between IShares and ILOW is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and AB Active ETFs, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Active ETFs, 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 EAFE are associated (or correlated) with AB Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Active ETFs, has no effect on the direction of IShares MSCI i.e., IShares MSCI and AB Active go up and down completely randomly.

Pair Corralation between IShares MSCI and AB Active

Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the AB Active. In addition to that, IShares MSCI is 1.16 times more volatile than AB Active ETFs,. It trades about -0.12 of its total potential returns per unit of risk. AB Active ETFs, is currently generating about -0.08 per unit of volatility. If you would invest  3,650  in AB Active ETFs, on August 30, 2024 and sell it today you would lose (137.00) from holding AB Active ETFs, or give up 3.75% of portfolio value over 90 days.

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

iShares MSCI EAFE  vs.  AB Active ETFs,

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. Despite somewhat strong technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AB Active ETFs,

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares MSCI and AB Active

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

The idea behind iShares MSCI EAFE and AB Active ETFs, 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.