Correlation Between IShares MSCI and Add Value

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

Diversification Opportunities for IShares MSCI and Add Value

-0.49

Correlation Coefficient

IShares MSCI  Add Value

Very good diversification

The 3 months correlation between IShares and Add is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Add Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Add Value Fund 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 Add Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Add Value Fund has no effect on the direction of IShares MSCI i.e., IShares MSCI and Add Value go up and down completely randomly.

Pair Corralation between IShares MSCI and Add Value

Assuming the 90 days trading horizon iShares MSCI USA is expected to generate 0.59 times more return on investment than Add Value. However, iShares MSCI USA is 1.69 times less risky than Add Value. It trades about 0.2 of its potential returns per unit of risk. Add Value Fund is currently generating about 0.03 per unit of risk. If you would invest  1,042  in iShares MSCI USA on September 12, 2024 and sell it today you would earn a total of  96.00  from holding iShares MSCI USA or generate 9.21% 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 USA  vs.  Add Value Fund

iShares MSCI USA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 16 (%) 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.

Add Value Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Add Value Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Add Value is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Add Value

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

The idea behind iShares MSCI USA and Add Value Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.