Correlation Between IShares MSCI and IShares Diversified
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares Diversified 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 Diversified 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 iShares Diversified Monthly, you can compare the effects of market volatilities on IShares MSCI and IShares Diversified 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 Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares Diversified.
Diversification Opportunities for IShares MSCI and IShares Diversified
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and IShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and iShares Diversified Monthly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Diversified 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 IShares Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Diversified has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares Diversified go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares Diversified
Assuming the 90 days trading horizon iShares MSCI EAFE is expected to generate 1.91 times more return on investment than IShares Diversified. However, IShares MSCI is 1.91 times more volatile than iShares Diversified Monthly. It trades about 0.08 of its potential returns per unit of risk. iShares Diversified Monthly is currently generating about 0.1 per unit of risk. If you would invest 2,843 in iShares MSCI EAFE on August 28, 2024 and sell it today you would earn a total of 793.00 from holding iShares MSCI EAFE or generate 27.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. iShares Diversified Monthly
Performance |
| Timeline |
| iShares MSCI EAFE |
| iShares Diversified |
IShares MSCI and IShares Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares Diversified
The main advantage of trading using opposite IShares MSCI and IShares Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares Diversified 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 Diversified will offset losses from the drop in IShares Diversified's long position.| IShares MSCI vs. Vanguard FTSE Developed | IShares MSCI vs. BMO MSCI EAFE | IShares MSCI vs. BMO Low Volatility |
| IShares Diversified vs. iShares SPTSX Capped | IShares Diversified vs. iShares Canadian Select | IShares Diversified vs. iShares SPTSX Completion | IShares Diversified vs. iShares Canadian Real |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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