Correlation Between IShares MSCI and OShares Europe

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

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

Diversification Opportunities for IShares MSCI and OShares Europe

0.98

Correlation Coefficient

IShares MSCI  OShares Europe

Almost no diversification

The 3 months correlation between IShares and OShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI France and OShares Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OShares Europe Quality 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 France are associated (or correlated) with OShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OShares Europe Quality has no effect on the direction of IShares MSCI i.e., IShares MSCI and OShares Europe go up and down completely randomly.

Pair Corralation between IShares MSCI and OShares Europe

Considering the 90-day investment horizon iShares MSCI France is expected to generate 1.33 times more return on investment than OShares Europe. However, IShares MSCI is 1.33 times more volatile than OShares Europe Quality. It trades about -0.07 of its potential returns per unit of risk. OShares Europe Quality is currently generating about -0.1 per unit of risk. If you would invest  3,899  in iShares MSCI France on September 12, 2024 and sell it today you would lose (196.00) from holding iShares MSCI France or give up 5.03% of portfolio value over 90 days.

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

iShares MSCI France  vs.  OShares Europe Quality

iShares MSCI France

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI France has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

OShares Europe Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OShares Europe Quality has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, OShares Europe is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares MSCI and OShares Europe

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

The idea behind iShares MSCI France and OShares Europe Quality 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.