Correlation Between United States and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both United States 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 United States and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States 12 and iShares MSCI EAFE, you can compare the effects of market volatilities on United States 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 United States with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and IShares MSCI.
Diversification Opportunities for United States and IShares MSCI
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding United States 12 and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and United States 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 United States 12 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 EAFE has no effect on the direction of United States i.e., United States and IShares MSCI go up and down completely randomly.
Pair Corralation between United States and IShares MSCI
Considering the 90-day investment horizon United States 12 is expected to generate 2.02 times more return on investment than IShares MSCI. However, United States is 2.02 times more volatile than iShares MSCI EAFE. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.04 per unit of risk. If you would invest 3,433 in United States 12 on January 20, 2024 and sell it today you would earn a total of 584.00 from holding United States 12 or generate 17.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States 12 vs. iShares MSCI EAFE
Performance |
| Timeline |
| United States 12 |
| iShares MSCI EAFE |
United States and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and IShares MSCI
The main advantage of trading using opposite United States and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.| United States vs. Invesco DB Oil | United States vs. United States Gasoline | United States vs. United States Brent | United States vs. United States 12 |
| IShares MSCI vs. iShares ESG Advanced | IShares MSCI vs. iShares ESG Advanced | IShares MSCI vs. iShares ESG MSCI | IShares MSCI vs. iShares ESG Aware |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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