Correlation Between Xtrackers MSCI and IShares AsiaPacific

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

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

Diversification Opportunities for Xtrackers MSCI and IShares AsiaPacific

0.6

Correlation Coefficient

Xtrackers MSCI  IShares AsiaPacific

Poor diversification

The 3 months correlation between Xtrackers and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and iShares AsiaPacific Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AsiaPacific and Xtrackers 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 Xtrackers MSCI EAFE are associated (or correlated) with IShares AsiaPacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AsiaPacific has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and IShares AsiaPacific go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and IShares AsiaPacific

Given the investment horizon of 90 days Xtrackers MSCI EAFE is expected to under-perform the IShares AsiaPacific. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers MSCI EAFE is 1.25 times less risky than IShares AsiaPacific. The etf trades about -0.12 of its potential returns per unit of risk. The iShares AsiaPacific Dividend is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,703  in iShares AsiaPacific Dividend on September 15, 2024 and sell it today you would earn a total of  6.00  from holding iShares AsiaPacific Dividend or generate 0.16% return on investment over 90 days.

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

Xtrackers MSCI EAFE  vs.  iShares AsiaPacific Dividend

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares AsiaPacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares AsiaPacific Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares AsiaPacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers MSCI and IShares AsiaPacific

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

The idea behind Xtrackers MSCI EAFE and iShares AsiaPacific Dividend 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.