Correlation Between IShares JP and IShares MSCI

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

Diversification Opportunities for IShares JP and IShares MSCI

0.63

Correlation Coefficient

IShares JP  IShares MSCI

Poor diversification

The 3 months correlation between IShares and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and IShares JP 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 JP Morgan 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 Japan has no effect on the direction of IShares JP i.e., IShares JP and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares JP and IShares MSCI

Assuming the 90 days trading horizon iShares JP Morgan is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, iShares JP Morgan is 2.07 times less risky than IShares MSCI. The etf trades about -0.02 of its potential returns per unit of risk. The iShares MSCI Japan is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  330,400  in iShares MSCI Japan on September 13, 2024 and sell it today you would earn a total of  4,850  from holding iShares MSCI Japan or generate 1.47% return on investment over 90 days.

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

iShares JP Morgan  vs.  iShares MSCI Japan

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares MSCI Japan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Japan are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI 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 JP and IShares MSCI

The main advantage of trading using opposite IShares JP and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares JP 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 JP Morgan and iShares MSCI Japan 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.