Correlation Between IShares Edge and IShares MSCI

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

Diversification Opportunities for IShares Edge and IShares MSCI

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between IShares and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging and IShares Edge 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 Edge MSCI 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 Emerging has no effect on the direction of IShares Edge i.e., IShares Edge and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares Edge and IShares MSCI

Assuming the 90 days trading horizon iShares Edge MSCI is expected to generate 1.52 times more return on investment than IShares MSCI. However, IShares Edge is 1.52 times more volatile than iShares MSCI Emerging. It trades about 0.28 of its potential returns per unit of risk. iShares MSCI Emerging is currently generating about -0.27 per unit of risk. If you would invest  3,420  in iShares Edge MSCI on September 1, 2024 and sell it today you would earn a total of  141.00  from holding iShares Edge MSCI or generate 4.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

iShares Edge MSCI  vs.  iShares MSCI Emerging

 Performance 
       Timeline  
iShares Edge MSCI 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Edge MSCI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Edge is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
iShares MSCI Emerging 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

IShares Edge and IShares MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Edge and IShares MSCI

The main advantage of trading using opposite IShares Edge and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge 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 Edge MSCI and iShares MSCI Emerging 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 CEOs Directory module to screen CEOs from public companies around the world.

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