Correlation Between IShares MSCI and IShares JPX
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares JPX 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 JPX 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 JPX Nikkei 400, you can compare the effects of market volatilities on IShares MSCI and IShares JPX 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 JPX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares JPX.
Diversification Opportunities for IShares MSCI and IShares JPX
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Japan and iShares JPX Nikkei 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JPX Nikkei 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 JPX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JPX Nikkei has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares JPX go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares JPX
Given the investment horizon of 90 days iShares MSCI Japan is expected to generate 1.36 times more return on investment than IShares JPX. However, IShares MSCI is 1.36 times more volatile than iShares JPX Nikkei 400. It trades about 0.08 of its potential returns per unit of risk. iShares JPX Nikkei 400 is currently generating about -0.06 per unit of risk. If you would invest 3,073 in iShares MSCI Japan on October 23, 2024 and sell it today you would earn a total of 48.00 from holding iShares MSCI Japan or generate 1.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Japan vs. iShares JPX Nikkei 400
Performance |
| Timeline |
| iShares MSCI Japan |
| iShares JPX Nikkei |
IShares MSCI and IShares JPX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares JPX
The main advantage of trading using opposite IShares MSCI and IShares JPX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares JPX 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 JPX will offset losses from the drop in IShares JPX's long position.| IShares MSCI vs. iShares MSCI Qatar | IShares MSCI vs. iShares MSCI UAE | IShares MSCI vs. iShares MSCI Europe | IShares MSCI vs. iShares MSCI Japan |
| IShares JPX vs. iShares MSCI Japan | IShares JPX vs. iShares Currency Hedged | IShares JPX vs. iShares MSCI United |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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