Correlation Between IShares MSCI and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Xtrackers MSCI 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 Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Hong and Xtrackers MSCI Japan, you can compare the effects of market volatilities on IShares MSCI and Xtrackers MSCI 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 Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Xtrackers MSCI.
Diversification Opportunities for IShares MSCI and Xtrackers MSCI
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Xtrackers is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Hong and Xtrackers MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Japan 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 Hong are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Japan has no effect on the direction of IShares MSCI i.e., IShares MSCI and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between IShares MSCI and Xtrackers MSCI
Considering the 90-day investment horizon iShares MSCI Hong is expected to under-perform the Xtrackers MSCI. In addition to that, IShares MSCI is 1.27 times more volatile than Xtrackers MSCI Japan. It trades about -0.18 of its total potential returns per unit of risk. Xtrackers MSCI Japan is currently generating about 0.16 per unit of volatility. If you would invest 7,140 in Xtrackers MSCI Japan on August 25, 2024 and sell it today you would earn a total of 253.00 from holding Xtrackers MSCI Japan or generate 3.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Hong vs. Xtrackers MSCI Japan
Performance |
| Timeline |
| iShares MSCI Hong |
| Xtrackers MSCI Japan |
IShares MSCI and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Xtrackers MSCI
The main advantage of trading using opposite IShares MSCI and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Xtrackers MSCI 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| IShares MSCI vs. iShares MSCI Singapore | IShares MSCI vs. iShares MSCI Taiwan | IShares MSCI vs. iShares MSCI Malaysia | IShares MSCI vs. iShares MSCI Australia |
| Xtrackers MSCI vs. iShares MSCI South | Xtrackers MSCI vs. iShares MSCI Hong | Xtrackers MSCI vs. iShares MSCI Taiwan | Xtrackers MSCI vs. iShares MSCI Germany |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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