Correlation Between IShares MSCI and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Franklin FTSE 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 Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI South and Franklin FTSE Japan, you can compare the effects of market volatilities on IShares MSCI and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Franklin FTSE.
Diversification Opportunities for IShares MSCI and Franklin FTSE
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Franklin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI South and Franklin FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE 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 South are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Japan has no effect on the direction of IShares MSCI i.e., IShares MSCI and Franklin FTSE go up and down completely randomly.
Pair Corralation between IShares MSCI and Franklin FTSE
Considering the 90-day investment horizon IShares MSCI is expected to generate 2.95 times less return on investment than Franklin FTSE. In addition to that, IShares MSCI is 1.44 times more volatile than Franklin FTSE Japan. It trades about 0.01 of its total potential returns per unit of risk. Franklin FTSE Japan is currently generating about 0.05 per unit of volatility. If you would invest 2,248 in Franklin FTSE Japan on August 24, 2024 and sell it today you would earn a total of 611.00 from holding Franklin FTSE Japan or generate 27.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI South vs. Franklin FTSE Japan
Performance |
| Timeline |
| iShares MSCI South |
| Franklin FTSE Japan |
IShares MSCI and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Franklin FTSE
The main advantage of trading using opposite IShares MSCI and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| IShares MSCI vs. iShares MSCI Malaysia | IShares MSCI vs. iShares MSCI Hong | IShares MSCI vs. HUMANA INC | IShares MSCI vs. SCOR PK |
| Franklin FTSE vs. iShares MSCI South | Franklin FTSE vs. iShares MSCI Hong | Franklin FTSE vs. iShares MSCI Taiwan | Franklin FTSE 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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