Correlation Between IShares MSCI and IShares STOXX
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares STOXX 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 STOXX 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 STOXX Europe, you can compare the effects of market volatilities on IShares MSCI and IShares STOXX 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 STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares STOXX.
Diversification Opportunities for IShares MSCI and IShares STOXX
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe 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 STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares STOXX go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares STOXX
Assuming the 90 days trading horizon iShares MSCI World is expected to generate 0.99 times more return on investment than IShares STOXX. However, iShares MSCI World is 1.01 times less risky than IShares STOXX. It trades about 0.13 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about 0.05 per unit of risk. If you would invest 5,618 in iShares MSCI World on August 27, 2024 and sell it today you would earn a total of 2,093 from holding iShares MSCI World or generate 37.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI World vs. iShares STOXX Europe
Performance |
| Timeline |
| iShares MSCI World |
| iShares STOXX Europe |
IShares MSCI and IShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares STOXX
The main advantage of trading using opposite IShares MSCI and IShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares STOXX 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 STOXX will offset losses from the drop in IShares STOXX's long position.| IShares MSCI vs. SPDR Dow Jones | IShares MSCI vs. iShares SP 500 | IShares MSCI vs. iShares China CNY | IShares MSCI vs. iShares Core MSCI |
| IShares STOXX vs. SPDR Dow Jones | IShares STOXX vs. iShares SP 500 | IShares STOXX vs. iShares China CNY | IShares STOXX vs. iShares Core MSCI |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |