Correlation Between IShares MSCI and IShares Edge
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Edge 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 Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI USA and iShares Edge MSCI, you can compare the effects of market volatilities on IShares MSCI and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Edge.
Diversification Opportunities for IShares MSCI and IShares Edge
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 USA are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Edge go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Edge
Given the investment horizon of 90 days iShares MSCI USA is expected to generate 0.96 times more return on investment than IShares Edge. However, iShares MSCI USA is 1.04 times less risky than IShares Edge. It trades about 0.13 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.06 per unit of risk. If you would invest 12,724 in iShares MSCI USA on August 31, 2024 and sell it today you would earn a total of 5,805 from holding iShares MSCI USA or generate 45.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. iShares Edge MSCI
Performance |
| Timeline |
| iShares MSCI USA |
| iShares Edge MSCI |
IShares MSCI and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Edge
The main advantage of trading using opposite IShares MSCI and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. Invesco SP 500 |
| IShares Edge vs. iShares Equity Factor | IShares Edge vs. iShares MSCI Emerging | IShares Edge vs. iShares MSCI USA | IShares Edge vs. iShares MSCI Intl |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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