Correlation Between IShares MSCI and Inspire International

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

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

Diversification Opportunities for IShares MSCI and Inspire International

0.73

Correlation Coefficient

IShares MSCI  Inspire International

Poor diversification

The 3 months correlation between IShares and Inspire is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and Inspire International ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire International ESG 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 Intl are associated (or correlated) with Inspire International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire International ESG has no effect on the direction of IShares MSCI i.e., IShares MSCI and Inspire International go up and down completely randomly.

Pair Corralation between IShares MSCI and Inspire International

Given the investment horizon of 90 days iShares MSCI Intl is expected to generate 1.06 times more return on investment than Inspire International. However, IShares MSCI is 1.06 times more volatile than Inspire International ESG. It trades about 0.06 of its potential returns per unit of risk. Inspire International ESG is currently generating about 0.05 per unit of risk. If you would invest  2,994  in iShares MSCI Intl on September 13, 2024 and sell it today you would earn a total of  926.00  from holding iShares MSCI Intl or generate 30.93% return on investment over 90 days.

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

iShares MSCI Intl  vs.  Inspire International ESG

iShares MSCI Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Intl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Inspire International ESG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspire International ESG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Inspire International is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and Inspire International

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

The idea behind iShares MSCI Intl and Inspire International ESG 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.