Correlation Between IShares Core and Deka MSCI

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

By analyzing existing cross correlation between iShares Core SP and Deka MSCI World, you can compare the effects of market volatilities on IShares Core and Deka 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 Core with a short position of Deka MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Deka MSCI.

Diversification Opportunities for IShares Core and Deka MSCI

0.99

Correlation Coefficient

IShares Core  Deka MSCI

No risk reduction

The 3 months correlation between IShares and Deka is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Deka MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka MSCI World and IShares Core 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 Core SP are associated (or correlated) with Deka MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka MSCI World has no effect on the direction of IShares Core i.e., IShares Core and Deka MSCI go up and down completely randomly.

Pair Corralation between IShares Core and Deka MSCI

Assuming the 90 days trading horizon iShares Core SP is expected to generate 1.22 times more return on investment than Deka MSCI. However, IShares Core is 1.22 times more volatile than Deka MSCI World. It trades about 0.24 of its potential returns per unit of risk. Deka MSCI World is currently generating about 0.25 per unit of risk. If you would invest  53,566  in iShares Core SP on September 16, 2024 and sell it today you would earn a total of  7,572  from holding iShares Core SP or generate 14.14% return on investment over 90 days.

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

iShares Core SP  vs.  Deka MSCI World

iShares Core SP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares Core reported solid returns over the last few months and may actually be approaching a breakup point.

Deka MSCI World

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Deka MSCI World are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Deka MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Deka MSCI

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

The idea behind iShares Core SP and Deka MSCI World 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.