Correlation Between IShares MSCI and Financial Select
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Financial Select 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 Financial Select 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 Financial Select Sector, you can compare the effects of market volatilities on IShares MSCI and Financial Select 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 Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Financial Select.
Diversification Opportunities for IShares MSCI and Financial Select
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Financial is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector 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 Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of IShares MSCI i.e., IShares MSCI and Financial Select go up and down completely randomly.
Pair Corralation between IShares MSCI and Financial Select
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.02 times less return on investment than Financial Select. In addition to that, IShares MSCI is 1.12 times more volatile than Financial Select Sector. It trades about 0.08 of its total potential returns per unit of risk. Financial Select Sector is currently generating about 0.09 per unit of volatility. If you would invest 3,451 in Financial Select Sector on November 19, 2024 and sell it today you would earn a total of 1,729 from holding Financial Select Sector or generate 50.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Europe vs. Financial Select Sector
Performance |
| Timeline |
| iShares MSCI Europe |
| Financial Select Sector |
IShares MSCI and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Financial Select
The main advantage of trading using opposite IShares MSCI and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's 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 |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |