Correlation Between IShares MSCI and IShares Equity
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Equity 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 Equity 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 Equity Factor, you can compare the effects of market volatilities on IShares MSCI and IShares Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Equity.
Diversification Opportunities for IShares MSCI and IShares Equity
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and iShares Equity Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equity Factor 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equity Factor has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Equity go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Equity
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.17 times less return on investment than IShares Equity. But when comparing it to its historical volatility, iShares MSCI USA is 1.03 times less risky than IShares Equity. It trades about 0.14 of its potential returns per unit of risk. iShares Equity Factor is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,522 in iShares Equity Factor on August 25, 2024 and sell it today you would earn a total of 1,674 from holding iShares Equity Factor or generate 37.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. iShares Equity Factor
Performance |
| Timeline |
| iShares MSCI USA |
| iShares Equity Factor |
IShares MSCI and IShares Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Equity
The main advantage of trading using opposite IShares MSCI and IShares Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Equity 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 Equity will offset losses from the drop in IShares Equity's long position.| IShares MSCI vs. iShares Equity Factor | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares Edge MSCI |
| IShares Equity vs. Morningstar Unconstrained Allocation | IShares Equity vs. High Yield Municipal Fund | IShares Equity vs. Via Renewables | IShares Equity vs. Knife River |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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