Correlation Between IShares MSCI and IShares III
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares III 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 III 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 III Public, you can compare the effects of market volatilities on IShares MSCI and IShares III 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 III. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares III.
Diversification Opportunities for IShares MSCI and IShares III
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IShares and IShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI World and IShares III Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares III Public 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 III. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares III Public has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares III go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares III
Assuming the 90 days horizon IShares MSCI World is expected to generate 2.29 times more return on investment than IShares III. However, IShares MSCI is 2.29 times more volatile than IShares III Public. It trades about 0.08 of its potential returns per unit of risk. IShares III Public is currently generating about 0.04 per unit of risk. If you would invest 716.00 in IShares MSCI World on August 25, 2024 and sell it today you would earn a total of 148.00 from holding IShares MSCI World or generate 20.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.78% |
| Values | Daily Returns |
IShares MSCI World vs. IShares III Public
Performance |
| Timeline |
| IShares MSCI World |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| IShares III Public |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
IShares MSCI and IShares III Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares III
The main advantage of trading using opposite IShares MSCI and IShares III positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares III 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 III will offset losses from the drop in IShares III's long position.The idea behind IShares MSCI World and IShares III Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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