Correlation Between IShares Small and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares Small 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 Small 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 Small Cap and iShares MSCI Emerging, you can compare the effects of market volatilities on IShares Small 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 Small with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Small and IShares MSCI.
Diversification Opportunities for IShares Small and IShares MSCI
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and IShares is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares Small Cap and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging and IShares Small 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 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 Emerging has no effect on the direction of IShares Small i.e., IShares Small and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares Small and IShares MSCI
Assuming the 90 days trading horizon iShares Small Cap is expected to generate 1.61 times more return on investment than IShares MSCI. However, IShares Small is 1.61 times more volatile than iShares MSCI Emerging. It trades about 0.09 of its potential returns per unit of risk. iShares MSCI Emerging is currently generating about 0.08 per unit of risk. If you would invest 3,630 in iShares Small Cap on September 3, 2024 and sell it today you would earn a total of 1,072 from holding iShares Small Cap or generate 29.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Small Cap vs. iShares MSCI Emerging
Performance |
| Timeline |
| iShares Small Cap |
| iShares MSCI Emerging |
IShares Small and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Small and IShares MSCI
The main advantage of trading using opposite IShares Small and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Small 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 Small vs. iShares SPTSX Small | IShares Small vs. iShares Canadian Value | IShares Small vs. iShares Canadian Growth | IShares Small vs. iShares SPTSX Completion |
| IShares MSCI vs. iShares SPTSX Small | IShares MSCI vs. iShares MSCI World | IShares MSCI vs. iShares Small Cap | IShares MSCI vs. iShares 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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