Correlation Between Xtrackers MSCI and IShares Currency
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and IShares Currency 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 Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI Japan and iShares Currency Hedged, you can compare the effects of market volatilities on Xtrackers MSCI and IShares Currency 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 Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and IShares Currency.
Diversification Opportunities for Xtrackers MSCI and IShares Currency
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xtrackers and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Japan and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 Japan are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and IShares Currency go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and IShares Currency
Given the investment horizon of 90 days Xtrackers MSCI Japan is expected to generate 1.61 times more return on investment than IShares Currency. However, Xtrackers MSCI is 1.61 times more volatile than iShares Currency Hedged. It trades about 0.09 of its potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.08 per unit of risk. If you would invest 4,634 in Xtrackers MSCI Japan on August 25, 2024 and sell it today you would earn a total of 2,759 from holding Xtrackers MSCI Japan or generate 59.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI Japan vs. iShares Currency Hedged
Performance |
| Timeline |
| Xtrackers MSCI Japan |
| iShares Currency Hedged |
Xtrackers MSCI and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and IShares Currency
The main advantage of trading using opposite Xtrackers MSCI and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, IShares Currency 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 Currency will offset losses from the drop in IShares Currency's long position.| Xtrackers MSCI vs. iShares MSCI South | Xtrackers MSCI vs. iShares MSCI Hong | Xtrackers MSCI vs. iShares MSCI Taiwan | Xtrackers MSCI vs. iShares MSCI Germany |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. Xtrackers MSCI EAFE |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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