Correlation Between IShares Trust and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both IShares Trust 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 Trust 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 Trust and iShares MSCI Netherlands, you can compare the effects of market volatilities on IShares Trust 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 Trust with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and IShares MSCI.

Diversification Opportunities for IShares Trust and IShares MSCI

-0.74

Correlation Coefficient

IShares Trust  IShares MSCI

Pay attention - limited upside

The 3 months correlation between IShares and IShares is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares MSCI Netherlands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Netherlands and IShares Trust 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 Trust 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 Netherlands has no effect on the direction of IShares Trust i.e., IShares Trust and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Trust and IShares MSCI

Assuming the 90 days trading horizon iShares Trust is expected to generate 3.01 times more return on investment than IShares MSCI. However, IShares Trust is 3.01 times more volatile than iShares MSCI Netherlands. It trades about 0.19 of its potential returns per unit of risk. iShares MSCI Netherlands is currently generating about -0.1 per unit of risk. If you would invest  281,300  in iShares Trust on September 15, 2024 and sell it today you would earn a total of  87,023  from holding iShares Trust or generate 30.94% return on investment over 90 days.

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

iShares Trust   vs.  iShares MSCI Netherlands

iShares Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

iShares MSCI Netherlands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Trust and IShares MSCI

The main advantage of trading using opposite IShares Trust and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust 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 Trust and iShares MSCI Netherlands 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.