Correlation Between IShares MSCI and IShares VII
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares VII 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 VII into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI World and iShares VII PLC, you can compare the effects of market volatilities on IShares MSCI and IShares VII 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 VII. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares VII.
Diversification Opportunities for IShares MSCI and IShares VII
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and iShares VII PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII PLC 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 World are associated (or correlated) with IShares VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII PLC has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares VII go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares VII
Assuming the 90 days trading horizon IShares MSCI is expected to generate 1.33 times less return on investment than IShares VII. But when comparing it to its historical volatility, iShares MSCI World is 1.66 times less risky than IShares VII. It trades about 0.09 of its potential returns per unit of risk. iShares VII PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,578,000 in iShares VII PLC on August 31, 2024 and sell it today you would earn a total of 1,226,000 from holding iShares VII PLC or generate 47.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI World vs. iShares VII PLC
Performance |
| Timeline |
| iShares MSCI World |
| iShares VII PLC |
IShares MSCI and IShares VII Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares VII
The main advantage of trading using opposite IShares MSCI and IShares VII positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares VII 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 VII will offset losses from the drop in IShares VII's long position.| IShares MSCI vs. iShares Core SP | IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. Lyxor UCITS Stoxx |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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