Correlation Between IShares European and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares European 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 European 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 European Property and iShares MSCI World, you can compare the effects of market volatilities on IShares European 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 European with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares European and IShares MSCI.
Diversification Opportunities for IShares European and IShares MSCI
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares European Property and iShares MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI World and IShares European 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 European 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 World has no effect on the direction of IShares European i.e., IShares European and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares European and IShares MSCI
Assuming the 90 days trading horizon iShares European Property is expected to generate 1.09 times more return on investment than IShares MSCI. However, IShares European is 1.09 times more volatile than iShares MSCI World. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI World is currently generating about -0.09 per unit of risk. If you would invest 2,734 in iShares European Property on September 13, 2024 and sell it today you would earn a total of 6.00 from holding iShares European Property or generate 0.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.27% |
| Values | Daily Returns |
iShares European Property vs. iShares MSCI World
Performance |
| Timeline |
| iShares European Property |
| iShares MSCI World |
IShares European and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares European and IShares MSCI
The main advantage of trading using opposite IShares European and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares European 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.| IShares European vs. iShares Corp Bond | IShares European vs. iShares Emerging Asia | IShares European vs. iShares MSCI Global | IShares European vs. iShares VII PLC |
| IShares MSCI vs. iShares Corp Bond | IShares MSCI vs. iShares Emerging Asia | IShares MSCI vs. iShares MSCI Global | IShares MSCI vs. iShares VII PLC |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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