Correlation Between IShares MSCI and IShares International
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares International 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 International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and iShares International Select, you can compare the effects of market volatilities on IShares MSCI and IShares International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares International.
Diversification Opportunities for IShares MSCI and IShares International
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International 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 EAFE are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares International go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares International
Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the IShares International. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI EAFE is 1.15 times less risky than IShares International. The etf trades about -0.17 of its potential returns per unit of risk. The iShares International Select is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 2,925 in iShares International Select on August 23, 2024 and sell it today you would lose (90.00) from holding iShares International Select or give up 3.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. iShares International Select
Performance |
| Timeline |
| iShares MSCI EAFE |
| iShares International |
IShares MSCI and IShares International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares International
The main advantage of trading using opposite IShares MSCI and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares International 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 International will offset losses from the drop in IShares International's long position.| IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. WisdomTree International SmallCap | IShares MSCI vs. iShares Russell Mid Cap |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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