Correlation Between IShares MSCI and IShares Latin
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Latin 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 Latin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Japan and iShares Latin America, you can compare the effects of market volatilities on IShares MSCI and IShares Latin 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 Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Latin.
Diversification Opportunities for IShares MSCI and IShares Latin
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and iShares Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Latin America 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 Japan are associated (or correlated) with IShares Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Latin America has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Latin go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Latin
Considering the 90-day investment horizon iShares MSCI Japan is expected to generate 0.73 times more return on investment than IShares Latin. However, iShares MSCI Japan is 1.37 times less risky than IShares Latin. It trades about -0.05 of its potential returns per unit of risk. iShares Latin America is currently generating about -0.26 per unit of risk. If you would invest 6,842 in iShares MSCI Japan on August 31, 2024 and sell it today you would lose (54.00) from holding iShares MSCI Japan or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Japan vs. iShares Latin America
Performance |
| Timeline |
| iShares MSCI Japan |
| iShares Latin America |
IShares MSCI and IShares Latin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Latin
The main advantage of trading using opposite IShares MSCI and IShares Latin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Latin 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 Latin will offset losses from the drop in IShares Latin's long position.| IShares MSCI vs. iShares MSCI South | IShares MSCI vs. iShares MSCI Hong | IShares MSCI vs. iShares MSCI Taiwan | IShares MSCI vs. iShares MSCI Germany |
| IShares Latin vs. iShares MSCI Mexico | IShares Latin vs. iShares MSCI Pacific | IShares Latin vs. iShares MSCI South | IShares Latin vs. iShares MSCI Brazil |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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