Correlation Between IShares MSCI and IShares AEX

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

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

Diversification Opportunities for IShares MSCI and IShares AEX

-0.54

Correlation Coefficient

IShares MSCI  IShares AEX

Excellent diversification

The 3 months correlation between IShares and IShares is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and iShares AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AEX UCITS 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 World are associated (or correlated) with IShares AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AEX UCITS has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares AEX go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares AEX

Assuming the 90 days trading horizon iShares MSCI World is expected to generate 0.94 times more return on investment than IShares AEX. However, iShares MSCI World is 1.07 times less risky than IShares AEX. It trades about 0.2 of its potential returns per unit of risk. iShares AEX UCITS is currently generating about -0.08 per unit of risk. If you would invest  7,060  in iShares MSCI World on September 26, 2024 and sell it today you would earn a total of  626.00  from holding iShares MSCI World or generate 8.87% return on investment over 90 days.

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

iShares MSCI World  vs.  iShares AEX UCITS

iShares MSCI World

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI World are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares AEX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares AEX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares AEX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares MSCI and IShares AEX

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

The idea behind iShares MSCI World and iShares AEX UCITS 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..