Correlation Between IShares MSCI and IShares II
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares II 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 II 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 II Public, you can compare the effects of market volatilities on IShares MSCI and IShares II 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 II. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares II.
Diversification Opportunities for IShares MSCI and IShares II
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and iShares II Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares II 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 II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares II Public has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares II go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares II
Assuming the 90 days trading horizon iShares MSCI World is expected to generate 0.74 times more return on investment than IShares II. However, iShares MSCI World is 1.36 times less risky than IShares II. It trades about -0.01 of its potential returns per unit of risk. iShares II Public is currently generating about -0.03 per unit of risk. If you would invest 746.00 in iShares MSCI World on September 1, 2024 and sell it today you would lose (7.00) from holding iShares MSCI World or give up 0.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI World vs. iShares II Public
Performance |
| Timeline |
| iShares MSCI World |
| iShares II Public |
IShares MSCI and IShares II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares II
The main advantage of trading using opposite IShares MSCI and IShares II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares II 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 II will offset losses from the drop in IShares II's long position.| IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. BlackRock ESG Multi Asset | IShares MSCI vs. Pershing Square Holdings | IShares MSCI vs. ASML Holding NV |
| IShares II vs. iShares Core MSCI | IShares II vs. BlackRock ESG Multi Asset | IShares II vs. Pershing Square Holdings | IShares II vs. ASML Holding NV |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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