Correlation Between Xtrackers MSCI and IShares Edge
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and IShares Edge 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 Xtrackers MSCI and IShares Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI World and iShares Edge MSCI, you can compare the effects of market volatilities on Xtrackers MSCI and IShares Edge 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 Xtrackers MSCI with a short position of IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and IShares Edge.
Diversification Opportunities for Xtrackers MSCI and IShares Edge
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Xtrackers and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI and Xtrackers 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 Xtrackers MSCI World are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and IShares Edge go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and IShares Edge
Assuming the 90 days trading horizon Xtrackers MSCI World is expected to generate 1.81 times more return on investment than IShares Edge. However, Xtrackers MSCI is 1.81 times more volatile than iShares Edge MSCI. It trades about 0.07 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.08 per unit of risk. If you would invest 7,880 in Xtrackers MSCI World on August 27, 2024 and sell it today you would earn a total of 1,501 from holding Xtrackers MSCI World or generate 19.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI World vs. iShares Edge MSCI
Performance |
| Timeline |
| Xtrackers MSCI World |
| iShares Edge MSCI |
Xtrackers MSCI and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and IShares Edge
The main advantage of trading using opposite Xtrackers MSCI and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| Xtrackers MSCI vs. Leverage Shares 3x | Xtrackers MSCI vs. WisdomTree SP 500 | Xtrackers MSCI vs. WisdomTree Silver 3x | Xtrackers MSCI vs. Leverage Shares 3x |
| IShares Edge vs. iShares MSCI Japan | IShares Edge vs. iShares JP Morgan | IShares Edge vs. iShares MSCI Europe | IShares Edge vs. iShares Nasdaq Biotechnology |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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