Correlation Between Brompton European and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Brompton European 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 Brompton European and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brompton European Dividend and iShares MSCI Europe, you can compare the effects of market volatilities on Brompton European 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 Brompton European with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brompton European and IShares MSCI.
Diversification Opportunities for Brompton European and IShares MSCI
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Brompton and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brompton European Dividend 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 Brompton European 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 Brompton European Dividend 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 Brompton European i.e., Brompton European and IShares MSCI go up and down completely randomly.
Pair Corralation between Brompton European and IShares MSCI
Assuming the 90 days trading horizon Brompton European Dividend is expected to generate 1.72 times more return on investment than IShares MSCI. However, Brompton European is 1.72 times more volatile than iShares MSCI Europe. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI Europe is currently generating about -0.02 per unit of risk. If you would invest 1,062 in Brompton European Dividend on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Brompton European Dividend or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Brompton European Dividend vs. iShares MSCI Europe
Performance |
| Timeline |
| Brompton European |
| iShares MSCI Europe |
Brompton European and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brompton European and IShares MSCI
The main advantage of trading using opposite Brompton European and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brompton European 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.| Brompton European vs. Brompton Global Dividend | Brompton European vs. Global Healthcare Income | Brompton European vs. Tech Leaders Income | Brompton European vs. Brompton North American |
| IShares MSCI vs. BMO Europe High | IShares MSCI vs. BMO High Dividend | IShares MSCI vs. BMO Covered Call | IShares MSCI vs. BMO Global High |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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