Correlation Between IShares MSCI and IShares Currency

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

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

Diversification Opportunities for IShares MSCI and IShares Currency

0.12

Correlation Coefficient

IShares MSCI  IShares Currency

Average diversification

The 3 months correlation between IShares and IShares is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI UAE and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 UAE are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Currency go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares Currency

Considering the 90-day investment horizon IShares MSCI is expected to generate 2.32 times less return on investment than IShares Currency. But when comparing it to its historical volatility, iShares MSCI UAE is 1.69 times less risky than IShares Currency. It trades about 0.05 of its potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,017  in iShares Currency Hedged on September 4, 2024 and sell it today you would earn a total of  233.00  from holding iShares Currency Hedged or generate 5.8% return on investment over 90 days.

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

iShares MSCI UAE  vs.  iShares Currency Hedged

iShares MSCI UAE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI UAE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Currency Hedged

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Currency Hedged are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares Currency is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with IShares MSCI and IShares Currency

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

The idea behind iShares MSCI UAE and iShares Currency Hedged 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.