Correlation Between IShares Core and IShares MSCI

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

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

Diversification Opportunities for IShares Core and IShares MSCI

0.93

Correlation Coefficient

IShares Core  IShares MSCI

Almost no diversification

The 3 months correlation between IShares and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 SP 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 USA has no effect on the direction of IShares Core i.e., IShares Core and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Core and IShares MSCI

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.04 times more return on investment than IShares MSCI. However, iShares Core SP is 25.16 times less risky than IShares MSCI. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI USA is currently generating about -0.22 per unit of risk. If you would invest  59,971  in iShares Core SP on September 28, 2024 and sell it today you would earn a total of  436.00  from holding iShares Core SP or generate 0.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

iShares Core SP  vs.  iShares MSCI USA

iShares Core SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares MSCI USA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Etf's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with IShares Core and IShares MSCI

The main advantage of trading using opposite IShares Core and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP and iShares MSCI USA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.