Correlation Between IShares MSCI and USCF ETF

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

Diversification Opportunities for IShares MSCI and USCF ETF

0.0

Correlation Coefficient

IShares MSCI  USCF ETF

Pay attention - limited upside

The 3 months correlation between IShares and USCF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and USCF ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF ETF Trust 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 USCF ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF ETF Trust has no effect on the direction of IShares MSCI i.e., IShares MSCI and USCF ETF go up and down completely randomly.

Pair Corralation between IShares MSCI and USCF ETF

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.1 times less return on investment than USCF ETF. In addition to that, IShares MSCI is 3.15 times more volatile than USCF ETF Trust. It trades about 0.05 of its total potential returns per unit of risk. USCF ETF Trust is currently generating about 0.16 per unit of volatility. If you would invest  2,634  in USCF ETF Trust on September 14, 2024 and sell it today you would earn a total of  426.30  from holding USCF ETF Trust or generate 16.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares MSCI China  vs.  USCF ETF Trust

iShares MSCI China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

USCF ETF Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in USCF ETF Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, USCF ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and USCF ETF

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

The idea behind iShares MSCI China and USCF ETF Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.