Correlation Between IShares MSCI and IShares Dow
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Dow 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 MSCI and IShares Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Japan and iShares Dow Jones, you can compare the effects of market volatilities on IShares MSCI and IShares Dow 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 MSCI with a short position of IShares Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Dow.
Diversification Opportunities for IShares MSCI and IShares Dow
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and iShares Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dow Jones and IShares 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 iShares MSCI Japan are associated (or correlated) with IShares Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dow Jones has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Dow go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Dow
Assuming the 90 days trading horizon IShares MSCI is expected to generate 1.25 times less return on investment than IShares Dow. In addition to that, IShares MSCI is 1.37 times more volatile than iShares Dow Jones. It trades about 0.06 of its total potential returns per unit of risk. iShares Dow Jones is currently generating about 0.1 per unit of volatility. If you would invest 5,959 in iShares Dow Jones on September 12, 2024 and sell it today you would earn a total of 1,604 from holding iShares Dow Jones or generate 26.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
iShares MSCI Japan vs. iShares Dow Jones
Performance |
| Timeline |
| iShares MSCI Japan |
| iShares Dow Jones |
IShares MSCI and IShares Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Dow
The main advantage of trading using opposite IShares MSCI and IShares Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Dow 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 Dow will offset losses from the drop in IShares Dow's long position.| IShares MSCI vs. WisdomTree Natural Gas | IShares MSCI vs. Leverage Shares 3x | IShares MSCI vs. GraniteShares 3x Short | IShares MSCI vs. WisdomTree Natural Gas |
| IShares Dow vs. iShares MSCI Japan | IShares Dow vs. iShares JP Morgan | IShares Dow vs. iShares MSCI Europe | IShares Dow vs. iShares Nasdaq Biotechnology |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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