Correlation Between IShares SP and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and Xtrackers MSCI USA, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Xtrackers MSCI.
Diversification Opportunities for IShares SP and Xtrackers MSCI
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Xtrackers is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Xtrackers MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI USA and IShares SP 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 SP 500 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 USA has no effect on the direction of IShares SP i.e., IShares SP and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between IShares SP and Xtrackers MSCI
Assuming the 90 days trading horizon IShares SP is expected to generate 1.49 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, iShares SP 500 is 1.41 times less risky than Xtrackers MSCI. It trades about 0.31 of its potential returns per unit of risk. Xtrackers MSCI USA is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 14,410 in Xtrackers MSCI USA on September 1, 2024 and sell it today you would earn a total of 1,096 from holding Xtrackers MSCI USA or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares SP 500 vs. Xtrackers MSCI USA
Performance |
| Timeline |
| iShares SP 500 |
| Xtrackers MSCI USA |
IShares SP and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Xtrackers MSCI
The main advantage of trading using opposite IShares SP and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP vs. iShares Corp Bond | IShares SP vs. iShares Emerging Asia | IShares SP vs. iShares MSCI Global | IShares SP vs. iShares VII PLC |
| Xtrackers MSCI vs. Xtrackers MSCI USA | Xtrackers MSCI vs. Xtrackers USD Corporate | Xtrackers MSCI vs. Xtrackers MSCI AC | Xtrackers MSCI vs. Xtrackers MSCI World |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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