Correlation Between IShares Core and Xtrackers FTSE

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

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

Diversification Opportunities for IShares Core and Xtrackers FTSE

0.92

Correlation Coefficient

IShares Core  Xtrackers FTSE

Almost no diversification

The 3 months correlation between IShares and Xtrackers is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Xtrackers FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE and IShares Core 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 Core MSCI are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE has no effect on the direction of IShares Core i.e., IShares Core and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between IShares Core and Xtrackers FTSE

Assuming the 90 days trading horizon IShares Core is expected to generate 2.21 times less return on investment than Xtrackers FTSE. But when comparing it to its historical volatility, iShares Core MSCI is 2.19 times less risky than Xtrackers FTSE. It trades about 0.07 of its potential returns per unit of risk. Xtrackers FTSE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,207  in Xtrackers FTSE on September 4, 2024 and sell it today you would earn a total of  791.00  from holding Xtrackers FTSE or generate 35.84% return on investment over 90 days.

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

iShares Core MSCI  vs.  Xtrackers FTSE

iShares Core MSCI

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xtrackers FTSE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers FTSE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Xtrackers FTSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and Xtrackers FTSE

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

The idea behind iShares Core MSCI and Xtrackers FTSE 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.