Correlation Between AMS Small and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both AMS Small 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 AMS Small and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMS Small Cap and iShares MSCI China, you can compare the effects of market volatilities on AMS Small 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 AMS Small with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMS Small and IShares MSCI.
Diversification Opportunities for AMS Small and IShares MSCI
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AMS and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AMS Small Cap and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China and AMS Small 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 AMS Small Cap 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 China has no effect on the direction of AMS Small i.e., AMS Small and IShares MSCI go up and down completely randomly.
Pair Corralation between AMS Small and IShares MSCI
Assuming the 90 days trading horizon AMS Small Cap is expected to generate 0.55 times more return on investment than IShares MSCI. However, AMS Small Cap is 1.83 times less risky than IShares MSCI. It trades about -0.21 of its potential returns per unit of risk. iShares MSCI China is currently generating about -0.15 per unit of risk. If you would invest 123,784 in AMS Small Cap on August 29, 2024 and sell it today you would lose (6,321) from holding AMS Small Cap or give up 5.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMS Small Cap vs. iShares MSCI China
Performance |
| Timeline |
AMS Small and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
AMS Small Cap
Pair trading matchups for AMS Small
iShares MSCI China
Pair trading matchups for IShares MSCI
Pair Trading with AMS Small and IShares MSCI
The main advantage of trading using opposite AMS Small and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMS Small 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 AMS Small Cap and iShares MSCI China 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.| IShares MSCI vs. iShares MSCI China | IShares MSCI vs. iShares MSCI World | IShares MSCI vs. iShares MSCI World | IShares MSCI vs. VanEck Global Real |
Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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