Correlation Between IShares MSCI and Wealthsimple Developed
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Wealthsimple Developed 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 Wealthsimple Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Wealthsimple Developed Markets, you can compare the effects of market volatilities on IShares MSCI and Wealthsimple Developed 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 Wealthsimple Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Wealthsimple Developed.
Diversification Opportunities for IShares MSCI and Wealthsimple Developed
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Wealthsimple is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Wealthsimple Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wealthsimple Developed 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 EAFE are associated (or correlated) with Wealthsimple Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wealthsimple Developed has no effect on the direction of IShares MSCI i.e., IShares MSCI and Wealthsimple Developed go up and down completely randomly.
Pair Corralation between IShares MSCI and Wealthsimple Developed
Assuming the 90 days trading horizon iShares MSCI EAFE is expected to generate 0.88 times more return on investment than Wealthsimple Developed. However, iShares MSCI EAFE is 1.13 times less risky than Wealthsimple Developed. It trades about -0.08 of its potential returns per unit of risk. Wealthsimple Developed Markets is currently generating about -0.13 per unit of risk. If you would invest 3,673 in iShares MSCI EAFE on August 28, 2024 and sell it today you would lose (37.00) from holding iShares MSCI EAFE or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Wealthsimple Developed Markets
Performance |
| Timeline |
| iShares MSCI EAFE |
| Wealthsimple Developed |
IShares MSCI and Wealthsimple Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Wealthsimple Developed
The main advantage of trading using opposite IShares MSCI and Wealthsimple Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Wealthsimple Developed 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 Wealthsimple Developed will offset losses from the drop in Wealthsimple Developed's long position.| IShares MSCI vs. iShares SPTSX Completion | IShares MSCI vs. iShares Canadian Universe | IShares MSCI vs. iShares Core SP | IShares MSCI vs. iShares SPTSX Capped |
| Wealthsimple Developed vs. Wealthsimple North America | Wealthsimple Developed vs. BMO Long Federal | Wealthsimple Developed vs. BMO Mid Provincial | Wealthsimple Developed vs. BMO Government Bond |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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