Correlation Between IShares Currency and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both IShares Currency 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 Currency 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 Currency Hedged and Xtrackers MSCI Europe, you can compare the effects of market volatilities on IShares Currency 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 Currency with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Currency and Xtrackers MSCI.
Diversification Opportunities for IShares Currency and Xtrackers MSCI
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Xtrackers is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and Xtrackers MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Europe and IShares Currency 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 Currency Hedged 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 Europe has no effect on the direction of IShares Currency i.e., IShares Currency and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between IShares Currency and Xtrackers MSCI
Given the investment horizon of 90 days iShares Currency Hedged is expected to generate 1.03 times more return on investment than Xtrackers MSCI. However, IShares Currency is 1.03 times more volatile than Xtrackers MSCI Europe. It trades about 0.08 of its potential returns per unit of risk. Xtrackers MSCI Europe is currently generating about 0.06 per unit of risk. If you would invest 2,910 in iShares Currency Hedged on August 31, 2024 and sell it today you would earn a total of 609.00 from holding iShares Currency Hedged or generate 20.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Currency Hedged vs. Xtrackers MSCI Europe
Performance |
| Timeline |
| iShares Currency Hedged |
| Xtrackers MSCI Europe |
IShares Currency and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Currency and Xtrackers MSCI
The main advantage of trading using opposite IShares Currency and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency 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 Currency vs. iShares ESG Aggregate | IShares Currency vs. SPDR MSCI Emerging | IShares Currency vs. Aquagold International | IShares Currency vs. Thrivent High Yield |
| Xtrackers MSCI vs. Pacer Trendpilot Mid | Xtrackers MSCI vs. Pacer Trendpilot Large | Xtrackers MSCI vs. Pacer Trendpilot 100 | Xtrackers MSCI vs. Pacer Trendpilot International |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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