Correlation Between Xtrackers MSCI and IShares MSCI

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Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI 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 Xtrackers MSCI and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI Europe and iShares MSCI Europe, you can compare the effects of market volatilities on Xtrackers MSCI 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 Xtrackers MSCI with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and IShares MSCI.

Diversification Opportunities for Xtrackers MSCI and IShares MSCI

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Xtrackers and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Europe and iShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Europe and Xtrackers 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 Xtrackers MSCI Europe 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 Europe has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and IShares MSCI go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and IShares MSCI

Given the investment horizon of 90 days Xtrackers MSCI Europe is expected to generate 0.64 times more return on investment than IShares MSCI. However, Xtrackers MSCI Europe is 1.55 times less risky than IShares MSCI. It trades about 0.08 of its potential returns per unit of risk. iShares MSCI Europe is currently generating about 0.03 per unit of risk. If you would invest  3,491  in Xtrackers MSCI Europe on November 28, 2024 and sell it today you would earn a total of  1,078  from holding Xtrackers MSCI Europe or generate 30.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Xtrackers MSCI Europe  vs.  iShares MSCI Europe

 Performance 
       Timeline  
Xtrackers MSCI Europe 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Europe are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in March 2025.
iShares MSCI Europe 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Europe are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Xtrackers MSCI and IShares MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xtrackers MSCI and IShares MSCI

The main advantage of trading using opposite Xtrackers MSCI and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 Xtrackers MSCI Europe and iShares MSCI Europe 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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