Correlation Between IShares MSCI and Brookstone Growth

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

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

Diversification Opportunities for IShares MSCI and Brookstone Growth

0.8

Correlation Coefficient

IShares MSCI  Brookstone Growth

Very poor diversification

The 3 months correlation between IShares and Brookstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Brookstone Growth Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookstone Growth Stock 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 USA are associated (or correlated) with Brookstone Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookstone Growth Stock has no effect on the direction of IShares MSCI i.e., IShares MSCI and Brookstone Growth go up and down completely randomly.

Pair Corralation between IShares MSCI and Brookstone Growth

Given the investment horizon of 90 days IShares MSCI is expected to generate 2.03 times less return on investment than Brookstone Growth. But when comparing it to its historical volatility, iShares MSCI USA is 1.14 times less risky than Brookstone Growth. It trades about 0.09 of its potential returns per unit of risk. Brookstone Growth Stock is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,252  in Brookstone Growth Stock on August 30, 2024 and sell it today you would earn a total of  266.00  from holding Brookstone Growth Stock or generate 8.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares MSCI USA  vs.  Brookstone Growth Stock

iShares MSCI USA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Brookstone Growth Stock

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brookstone Growth Stock are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Brookstone Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares MSCI and Brookstone Growth

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

The idea behind iShares MSCI USA and Brookstone Growth Stock 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.