Correlation Between IShares SPTSX and IShares MSCI

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

Diversification Opportunities for IShares SPTSX and IShares MSCI

0.63

Correlation Coefficient

IShares SPTSX  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 SPTSX Small and iShares MSCI Min in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Min and IShares SPTSX 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 SPTSX Small 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 Min has no effect on the direction of IShares SPTSX i.e., IShares SPTSX and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares SPTSX and IShares MSCI

Assuming the 90 days trading horizon iShares SPTSX Small is expected to generate 1.35 times more return on investment than IShares MSCI. However, IShares SPTSX is 1.35 times more volatile than iShares MSCI Min. It trades about 0.1 of its potential returns per unit of risk. iShares MSCI Min is currently generating about 0.14 per unit of risk. If you would invest  2,043  in iShares SPTSX Small on September 14, 2024 and sell it today you would earn a total of  100.00  from holding iShares SPTSX Small or generate 4.89% return on investment over 90 days.

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

iShares SPTSX Small  vs.  iShares MSCI Min

iShares SPTSX Small

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SPTSX Small are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares MSCI Min

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Min are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares SPTSX and IShares MSCI

The main advantage of trading using opposite IShares SPTSX and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SPTSX 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 SPTSX Small and iShares MSCI Min 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.