Correlation Between IShares MSCI and ETRACS Monthly
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and ETRACS Monthly 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 ETRACS Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Canada and ETRACS Monthly Pay, you can compare the effects of market volatilities on IShares MSCI and ETRACS Monthly 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 ETRACS Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and ETRACS Monthly.
Diversification Opportunities for IShares MSCI and ETRACS Monthly
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and ETRACS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Canada and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay 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 Canada are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of IShares MSCI i.e., IShares MSCI and ETRACS Monthly go up and down completely randomly.
Pair Corralation between IShares MSCI and ETRACS Monthly
Considering the 90-day investment horizon IShares MSCI is expected to generate 2.09 times less return on investment than ETRACS Monthly. But when comparing it to its historical volatility, iShares MSCI Canada is 2.59 times less risky than ETRACS Monthly. It trades about 0.17 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,569 in ETRACS Monthly Pay on October 20, 2024 and sell it today you would earn a total of 73.00 from holding ETRACS Monthly Pay or generate 4.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Canada vs. ETRACS Monthly Pay
Performance |
| Timeline |
| iShares MSCI Canada |
| ETRACS Monthly Pay |
IShares MSCI and ETRACS Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and ETRACS Monthly
The main advantage of trading using opposite IShares MSCI and ETRACS Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, ETRACS Monthly 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 ETRACS Monthly will offset losses from the drop in ETRACS Monthly's long position.| IShares MSCI vs. iShares MSCI Australia | IShares MSCI vs. iShares MSCI Germany | IShares MSCI vs. iShares MSCI United | IShares MSCI vs. iShares MSCI Switzerland |
| ETRACS Monthly vs. ETRACS 2xMonthly Pay | ETRACS Monthly vs. ETRACS Monthly Pay | ETRACS Monthly vs. ETRACS Monthly Pay | ETRACS Monthly vs. ETRACS 2xMonthly Pay |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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