Correlation Between IShares IBoxx and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx 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 IBoxx 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 iBoxx Investment and iShares MSCI EAFE, you can compare the effects of market volatilities on IShares IBoxx 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 IBoxx with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares MSCI.
Diversification Opportunities for IShares IBoxx 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 iBoxx Investment and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and IShares IBoxx 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 iBoxx Investment 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 EAFE has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares IBoxx and IShares MSCI
Considering the 90-day investment horizon IShares IBoxx is expected to generate 1.38 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, iShares iBoxx Investment is 1.56 times less risky than IShares MSCI. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,951 in iShares MSCI EAFE on August 28, 2024 and sell it today you would earn a total of 845.00 from holding iShares MSCI EAFE or generate 12.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBoxx Investment vs. iShares MSCI EAFE
Performance |
| Timeline |
| iShares iBoxx Investment |
| iShares MSCI EAFE |
IShares IBoxx and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and IShares MSCI
The main advantage of trading using opposite IShares IBoxx and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx 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 IBoxx vs. iShares iBoxx High | IShares IBoxx vs. iShares 1 3 Year | IShares IBoxx vs. iShares TIPS Bond | IShares IBoxx vs. iShares 7 10 Year |
| IShares MSCI vs. Dimensional Core Equity | IShares MSCI vs. Dimensional Emerging Core | IShares MSCI vs. Dimensional Targeted Value | IShares MSCI vs. Dimensional Small Cap |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |