Correlation Between IShares MSCI and Investment Managers

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

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

Diversification Opportunities for IShares MSCI and Investment Managers

0.72

Correlation Coefficient

IShares MSCI  Investment Managers

Poor diversification

The 3 months correlation between IShares and Investment is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Investment Managers Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Managers 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 World are associated (or correlated) with Investment Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Managers has no effect on the direction of IShares MSCI i.e., IShares MSCI and Investment Managers go up and down completely randomly.

Pair Corralation between IShares MSCI and Investment Managers

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.31 times less return on investment than Investment Managers. But when comparing it to its historical volatility, iShares MSCI World is 1.77 times less risky than Investment Managers. It trades about 0.16 of its potential returns per unit of risk. Investment Managers Series is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,128  in Investment Managers Series on September 2, 2024 and sell it today you would earn a total of  269.00  from holding Investment Managers Series or generate 8.6% return on investment over 90 days.

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

iShares MSCI World  vs.  Investment Managers Series

iShares MSCI World

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI World are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Investment Managers

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investment Managers Series are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Investment Managers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares MSCI and Investment Managers

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

The idea behind iShares MSCI World and Investment Managers Series 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.