Correlation Between IShares MSCI and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Core 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 Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Europe and iShares Core MSCI, you can compare the effects of market volatilities on IShares MSCI and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Core.
Diversification Opportunities for IShares MSCI and IShares Core
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 Europe are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Core go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Core
Assuming the 90 days trading horizon iShares MSCI Europe is expected to under-perform the IShares Core. In addition to that, IShares MSCI is 1.05 times more volatile than iShares Core MSCI. It trades about -0.16 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about -0.07 per unit of volatility. If you would invest 3,242 in iShares Core MSCI on August 30, 2024 and sell it today you would lose (54.00) from holding iShares Core MSCI or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Europe vs. iShares Core MSCI
Performance |
| Timeline |
| iShares MSCI Europe |
| iShares Core MSCI |
IShares MSCI and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Core
The main advantage of trading using opposite IShares MSCI and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| IShares MSCI vs. Vanguard FTSE Developed | IShares MSCI vs. Vanguard FTSE Emerging | IShares MSCI vs. Vanguard FTSE Developed | IShares MSCI vs. Vanguard Dividend Appreciation |
| IShares Core vs. BMO SP 500 | IShares Core vs. BMO MSCI Emerging | IShares Core vs. BMO Global Infrastructure | IShares Core vs. BMO MSCI EAFE |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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