Correlation Between IShares MSCI and Capital World

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on IShares MSCI and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Capital World.

Diversification Opportunities for IShares MSCI and Capital World

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Capital is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI EAFE and CAPITAL WORLD GROWTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of IShares MSCI i.e., IShares MSCI and Capital World go up and down completely randomly.

Pair Corralation between IShares MSCI and Capital World

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.92 times less return on investment than Capital World. But when comparing it to its historical volatility, IShares MSCI EAFE is 1.53 times less risky than Capital World. It trades about 0.19 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  6,263  in Capital World Growth on December 29, 2023 and sell it today you would earn a total of  220.00  from holding Capital World Growth or generate 3.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

IShares MSCI EAFE  vs.  CAPITAL WORLD GROWTH

 Performance 
       Timeline  
IShares MSCI EAFE 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IShares MSCI EAFE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Capital World Growth 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Capital World may actually be approaching a critical reversion point that can send shares even higher in April 2024.

IShares MSCI and Capital World Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and Capital World

The main advantage of trading using opposite IShares MSCI and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.
The idea behind IShares MSCI EAFE and Capital World Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

Other Complementary Tools

Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Portfolio Analyzer
Portfolio analysis module that provides access to portfolio diagnostics and optimization engine
Equity Valuation
Check real value of public entities based on technical and fundamental data
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Stocks Directory
Find actively traded stocks across global markets
Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency