Correlation Between Exchange Traded and IShares MSCI

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

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

Diversification Opportunities for Exchange Traded and IShares MSCI

0.87

Correlation Coefficient

Exchange Traded  IShares MSCI

Very poor diversification

The 3 months correlation between Exchange and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Traded Concepts and iShares MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI India and Exchange Traded 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 Exchange Traded Concepts 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 India has no effect on the direction of Exchange Traded i.e., Exchange Traded and IShares MSCI go up and down completely randomly.

Pair Corralation between Exchange Traded and IShares MSCI

Given the investment horizon of 90 days Exchange Traded Concepts is expected to under-perform the IShares MSCI. In addition to that, Exchange Traded is 1.01 times more volatile than iShares MSCI India. It trades about -0.04 of its total potential returns per unit of risk. iShares MSCI India is currently generating about -0.02 per unit of volatility. If you would invest  8,400  in iShares MSCI India on September 3, 2024 and sell it today you would lose (132.00) from holding iShares MSCI India or give up 1.57% of portfolio value over 90 days.

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

Exchange Traded Concepts  vs.  iShares MSCI India

Exchange Traded Concepts

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares MSCI India

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Exchange Traded and IShares MSCI

The main advantage of trading using opposite Exchange Traded and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Traded 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 Exchange Traded Concepts and iShares MSCI India 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.