Correlation Between IShares MSCI and FT Cboe

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

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

Diversification Opportunities for IShares MSCI and FT Cboe

-0.5

Correlation Coefficient

IShares MSCI  FT Cboe

Very good diversification

The 3 months correlation between IShares and BUFQ is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 China are associated (or correlated) with FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of IShares MSCI i.e., IShares MSCI and FT Cboe go up and down completely randomly.

Pair Corralation between IShares MSCI and FT Cboe

Given the investment horizon of 90 days IShares MSCI is expected to generate 9.38 times less return on investment than FT Cboe. In addition to that, IShares MSCI is 2.93 times more volatile than FT Cboe Vest. It trades about 0.01 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about 0.16 per unit of volatility. If you would invest  1,974  in FT Cboe Vest on September 26, 2024 and sell it today you would earn a total of  1,227  from holding FT Cboe Vest or generate 62.16% 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 China  vs.  FT Cboe Vest

iShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, IShares MSCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

FT Cboe Vest

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FT Cboe Vest are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, FT Cboe is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares MSCI and FT Cboe

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

The idea behind iShares MSCI China and FT Cboe Vest 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.