Correlation Between Consumer Staples and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Consumer Staples 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 Consumer Staples and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Staples Select and iShares MSCI EAFE, you can compare the effects of market volatilities on Consumer Staples 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 Consumer Staples with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and IShares MSCI.
Diversification Opportunities for Consumer Staples and IShares MSCI
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consumer and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Select 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 Consumer Staples 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 Consumer Staples Select 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 Consumer Staples i.e., Consumer Staples and IShares MSCI go up and down completely randomly.
Pair Corralation between Consumer Staples and IShares MSCI
Considering the 90-day investment horizon Consumer Staples is expected to generate 1.19 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Consumer Staples Select is 1.32 times less risky than IShares MSCI. It trades about 0.17 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,255 in iShares MSCI EAFE on January 26, 2024 and sell it today you would earn a total of 870.00 from holding iShares MSCI EAFE or generate 16.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.19% |
| Values | Daily Returns |
Consumer Staples Select vs. iShares MSCI EAFE
Performance |
| Timeline |
| Consumer Staples Select |
| iShares MSCI EAFE |
Consumer Staples and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and IShares MSCI
The main advantage of trading using opposite Consumer Staples and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples 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.| Consumer Staples vs. Fidelity MSCI Utilities | Consumer Staples vs. Fidelity MSCI Industrials | Consumer Staples vs. Fidelity MSCI Consumer | Consumer Staples vs. Fidelity MSCI Communication |
| IShares MSCI vs. iShares MSCI China | IShares MSCI vs. iShares Dividend and | IShares MSCI vs. iShares MSCI Frontier | IShares MSCI vs. iShares Short Maturity |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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