Correlation Between IShares Asia and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares Asia and IShares 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 Asia and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Asia Property and iShares MSCI Global, you can compare the effects of market volatilities on IShares Asia and IShares 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 Asia with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Asia and IShares MSCI.
Diversification Opportunities for IShares Asia and IShares MSCI
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia Property and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global and IShares Asia 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 Asia Property are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Global has no effect on the direction of IShares Asia i.e., IShares Asia and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares Asia and IShares MSCI
Assuming the 90 days trading horizon iShares Asia Property is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, iShares Asia Property is 1.77 times less risky than IShares MSCI. The etf trades about -0.12 of its potential returns per unit of risk. The iShares MSCI Global is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 734.00 in iShares MSCI Global on October 9, 2024 and sell it today you would earn a total of 39.00 from holding iShares MSCI Global or generate 5.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Asia Property vs. iShares MSCI Global
Performance |
| Timeline |
| iShares Asia Property |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| iShares MSCI Global |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IShares Asia and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Asia and IShares MSCI
The main advantage of trading using opposite IShares Asia and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Asia position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind iShares Asia Property and iShares MSCI Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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