Correlation Between IShares MSCI and Ishares IV

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

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

Diversification Opportunities for IShares MSCI and Ishares IV

0.61

Correlation Coefficient

IShares MSCI  Ishares IV

Poor diversification

The 3 months correlation between IShares and Ishares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EM and Ishares IV PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares IV PLC 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 EM are associated (or correlated) with Ishares IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares IV PLC has no effect on the direction of IShares MSCI i.e., IShares MSCI and Ishares IV go up and down completely randomly.

Pair Corralation between IShares MSCI and Ishares IV

Assuming the 90 days trading horizon iShares MSCI EM is expected to generate 1.24 times more return on investment than Ishares IV. However, IShares MSCI is 1.24 times more volatile than Ishares IV PLC. It trades about 0.13 of its potential returns per unit of risk. Ishares IV PLC is currently generating about 0.07 per unit of risk. If you would invest  3,764  in iShares MSCI EM on September 16, 2024 and sell it today you would earn a total of  319.00  from holding iShares MSCI EM or generate 8.48% return on investment over 90 days.

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

iShares MSCI EM  vs.  Ishares IV PLC

iShares MSCI EM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ishares IV PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares IV PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ishares IV 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 IShares MSCI and Ishares IV

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

The idea behind iShares MSCI EM and Ishares IV PLC 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 Stocks Directory module to find actively traded stocks across global markets.