Correlation Between IShares MSCI and ISHARES IV
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and ISHARES IV 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 IV 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 IV PLC, you can compare the effects of market volatilities on IShares MSCI and ISHARES IV 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 IV. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and ISHARES IV.
Diversification Opportunities for IShares MSCI and ISHARES IV
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and ISHARES is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and ISHARES IV PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISHARES IV PLC 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 IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISHARES IV PLC has no effect on the direction of IShares MSCI i.e., IShares MSCI and ISHARES IV go up and down completely randomly.
Pair Corralation between IShares MSCI and ISHARES IV
Assuming the 90 days trading horizon IShares MSCI is expected to generate 1.1 times less return on investment than ISHARES IV. But when comparing it to its historical volatility, iShares MSCI World is 1.6 times less risky than ISHARES IV. It trades about 0.38 of its potential returns per unit of risk. ISHARES IV PLC is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 605.00 in ISHARES IV PLC on October 21, 2024 and sell it today you would earn a total of 29.00 from holding ISHARES IV PLC or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI World vs. ISHARES IV PLC
Performance |
| Timeline |
| iShares MSCI World |
| ISHARES IV PLC |
IShares MSCI and ISHARES IV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and ISHARES IV
The main advantage of trading using opposite IShares MSCI and ISHARES IV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, ISHARES IV 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 IV will offset losses from the drop in ISHARES IV's long position.| IShares MSCI vs. iShares MSCI Japan | IShares MSCI vs. iShares JP Morgan | IShares MSCI vs. iShares MSCI Europe | IShares MSCI vs. iShares Nasdaq Biotechnology |
| ISHARES IV vs. ISHARES IV PLC | ISHARES IV vs. ISHARES V PLC | ISHARES IV vs. ISHARES IV PLC | ISHARES IV vs. ISHARES V PLC |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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