Correlation Between IShares MSCI and IShares Ultrashort
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Ultrashort 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 Ultrashort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Global and iShares Ultrashort Bond, you can compare the effects of market volatilities on IShares MSCI and IShares Ultrashort 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 Ultrashort. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Ultrashort.
Diversification Opportunities for IShares MSCI and IShares Ultrashort
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and iShares Ultrashort Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Ultrashort Bond 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 Global are associated (or correlated) with IShares Ultrashort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Ultrashort Bond has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Ultrashort go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Ultrashort
Assuming the 90 days trading horizon iShares MSCI Global is expected to under-perform the IShares Ultrashort. In addition to that, IShares MSCI is 4.1 times more volatile than iShares Ultrashort Bond. It trades about -0.17 of its total potential returns per unit of risk. iShares Ultrashort Bond is currently generating about -0.06 per unit of volatility. If you would invest 9,120 in iShares Ultrashort Bond on December 2, 2024 and sell it today you would lose (50.00) from holding iShares Ultrashort Bond or give up 0.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Global vs. iShares Ultrashort Bond
Performance |
| Timeline |
| iShares MSCI Global |
| iShares Ultrashort Bond |
IShares MSCI and IShares Ultrashort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Ultrashort
The main advantage of trading using opposite IShares MSCI and IShares Ultrashort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Ultrashort 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 Ultrashort will offset losses from the drop in IShares Ultrashort's long position.| IShares MSCI vs. iShares Corp Bond | ||
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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