Correlation Between IShares SP and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares SP and IShares MSCI 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 SP and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP Small Cap and iShares MSCI USA, you can compare the effects of market volatilities on IShares SP and IShares MSCI 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 SP with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares MSCI.
Diversification Opportunities for IShares SP and IShares MSCI
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA and IShares SP 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 SP Small Cap are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of IShares SP i.e., IShares SP and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares SP and IShares MSCI
Assuming the 90 days trading horizon iShares SP Small Cap is expected to generate 1.62 times more return on investment than IShares MSCI. However, IShares SP is 1.62 times more volatile than iShares MSCI USA. It trades about 0.08 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.11 per unit of risk. If you would invest 2,406 in iShares SP Small Cap on September 14, 2024 and sell it today you would earn a total of 663.00 from holding iShares SP Small Cap or generate 27.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP Small Cap vs. iShares MSCI USA
Performance |
| Timeline |
| iShares SP Small |
| iShares MSCI USA |
IShares SP and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares MSCI
The main advantage of trading using opposite IShares SP and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| IShares SP vs. iShares SPTSX 60 | IShares SP vs. iShares Core SP | IShares SP vs. iShares Core SPTSX | IShares SP vs. BMO Aggregate Bond |
| IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares SP Small Cap | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares SP Small Cap |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |