Correlation Between IShares MSCI and IShares Financials
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Financials 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 Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Europe and iShares Financials ETF, you can compare the effects of market volatilities on IShares MSCI and IShares Financials 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 Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Financials.
Diversification Opportunities for IShares MSCI and IShares Financials
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe and iShares Financials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financials ETF 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 Europe are associated (or correlated) with IShares Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financials ETF has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Financials go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Financials
Given the investment horizon of 90 days iShares MSCI Europe is expected to under-perform the IShares Financials. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Europe is 1.74 times less risky than IShares Financials. The etf trades about -0.12 of its potential returns per unit of risk. The iShares Financials ETF is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,820 in iShares Financials ETF on August 30, 2024 and sell it today you would earn a total of 1,077 from holding iShares Financials ETF or generate 9.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Europe vs. iShares Financials ETF
Performance |
| Timeline |
| iShares MSCI Europe |
| iShares Financials ETF |
IShares MSCI and IShares Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Financials
The main advantage of trading using opposite IShares MSCI and IShares Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Financials 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 Financials will offset losses from the drop in IShares Financials' long position.| IShares MSCI vs. iShares MSCI Eurozone | IShares MSCI vs. iShares MSCI Italy | IShares MSCI vs. iShares MSCI United | IShares MSCI vs. iShares MSCI All |
| IShares Financials vs. iShares Financial Services | IShares Financials vs. iShares Industrials ETF | IShares Financials vs. iShares Consumer Discretionary | IShares Financials vs. iShares Healthcare ETF |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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