Correlation Between IShares MSCI and IShares Small
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on IShares MSCI and IShares Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Small.
Diversification Opportunities for IShares MSCI and IShares Small
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Small go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Small
Given the investment horizon of 90 days IShares MSCI is expected to generate 2.25 times less return on investment than IShares Small. But when comparing it to its historical volatility, iShares MSCI USA is 2.45 times less risky than IShares Small. It trades about 0.22 of its potential returns per unit of risk. iShares Small Cap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,248 in iShares Small Cap on August 27, 2024 and sell it today you would earn a total of 318.00 from holding iShares Small Cap or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. iShares Small Cap
Performance |
| Timeline |
| iShares MSCI USA |
| iShares Small Cap |
IShares MSCI and IShares Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Small
The main advantage of trading using opposite IShares MSCI and IShares Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Small 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 Small will offset losses from the drop in IShares Small's long position.| IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares ESG Aware |
| IShares Small vs. Horizon Kinetics Inflation | IShares Small vs. Virtus ETF Trust | IShares Small vs. Invesco SP SmallCap | IShares Small vs. iShares MSCI USA |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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