Correlation Between ProShares MSCI and IShares MSCI

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

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

Diversification Opportunities for ProShares MSCI and IShares MSCI

0.57

Correlation Coefficient

ProShares MSCI  IShares MSCI

Very weak diversification

The 3 months correlation between ProShares and IShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Emerging and iShares MSCI ACWI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI ACWI and ProShares 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 ProShares MSCI Emerging 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 ACWI has no effect on the direction of ProShares MSCI i.e., ProShares MSCI and IShares MSCI go up and down completely randomly.

Pair Corralation between ProShares MSCI and IShares MSCI

Given the investment horizon of 90 days ProShares MSCI is expected to generate 1.55 times less return on investment than IShares MSCI. In addition to that, ProShares MSCI is 2.6 times more volatile than iShares MSCI ACWI. It trades about 0.04 of its total potential returns per unit of risk. iShares MSCI ACWI is currently generating about 0.16 per unit of volatility. If you would invest  11,439  in iShares MSCI ACWI on September 4, 2024 and sell it today you would earn a total of  764.00  from holding iShares MSCI ACWI or generate 6.68% return on investment over 90 days.

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

ProShares MSCI Emerging  vs.  iShares MSCI ACWI

ProShares MSCI Emerging

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares MSCI Emerging are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, ProShares MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares MSCI ACWI

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI ACWI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares MSCI and IShares MSCI

The main advantage of trading using opposite ProShares MSCI and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares MSCI 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 ProShares MSCI Emerging and iShares MSCI ACWI 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..