Correlation Between IShares MSCI and IShares Currency
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Currency 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 Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Intl and iShares Currency Hedged, you can compare the effects of market volatilities on IShares MSCI and IShares Currency 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 Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Currency.
Diversification Opportunities for IShares MSCI and IShares Currency
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 Intl are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Currency go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Currency
Given the investment horizon of 90 days iShares MSCI Intl is expected to under-perform the IShares Currency. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Intl is 1.17 times less risky than IShares Currency. The etf trades about -0.15 of its potential returns per unit of risk. The iShares Currency Hedged is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 2,842 in iShares Currency Hedged on August 30, 2024 and sell it today you would lose (94.00) from holding iShares Currency Hedged or give up 3.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Intl vs. iShares Currency Hedged
Performance |
| Timeline |
| iShares MSCI Intl |
| iShares Currency Hedged |
IShares MSCI and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Currency
The main advantage of trading using opposite IShares MSCI and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Currency 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 Currency will offset losses from the drop in IShares Currency's long position.| IShares MSCI vs. iShares Currency Hedged | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Edge MSCI | IShares MSCI vs. iShares MSCI Intl |
| IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged | IShares Currency vs. iShares Currency Hedged |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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