Correlation Between SP 500 and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both SP 500 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 SP 500 and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 VIX and iShares MSCI Japan, you can compare the effects of market volatilities on SP 500 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 SP 500 with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and IShares MSCI.
Diversification Opportunities for SP 500 and IShares MSCI
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between VILX and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan and SP 500 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 SP 500 VIX 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 Japan has no effect on the direction of SP 500 i.e., SP 500 and IShares MSCI go up and down completely randomly.
Pair Corralation between SP 500 and IShares MSCI
Assuming the 90 days trading horizon SP 500 VIX is expected to generate 53.44 times more return on investment than IShares MSCI. However, SP 500 is 53.44 times more volatile than iShares MSCI Japan. It trades about 0.04 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about 0.03 per unit of risk. If you would invest 798.00 in SP 500 VIX on September 4, 2024 and sell it today you would earn a total of 160,945 from holding SP 500 VIX or generate 20168.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP 500 VIX vs. iShares MSCI Japan
Performance |
| Timeline |
| SP 500 VIX |
| iShares MSCI Japan |
SP 500 and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP 500 and IShares MSCI
The main advantage of trading using opposite SP 500 and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 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.| SP 500 vs. GraniteShares 3x Short | SP 500 vs. WisdomTree Natural Gas | SP 500 vs. Leverage Shares 3x | SP 500 vs. WisdomTree Natural Gas |
| IShares MSCI vs. Leverage Shares 3x | IShares MSCI vs. WisdomTree Natural Gas | IShares MSCI vs. Leverage Shares 3x | IShares MSCI vs. GraniteShares 3x Short |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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