Correlation Between IShares MSCI and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and GE Aerospace 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 GE Aerospace 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 GE Aerospace, you can compare the effects of market volatilities on IShares MSCI and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and GE Aerospace.
Diversification Opportunities for IShares MSCI and GE Aerospace
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and GE Aerospace is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of IShares MSCI i.e., IShares MSCI and GE Aerospace go up and down completely randomly.
Pair Corralation between IShares MSCI and GE Aerospace
Considering the 90-day investment horizon IShares MSCI is expected to generate 15.87 times less return on investment than GE Aerospace. But when comparing it to its historical volatility, iShares MSCI EAFE is 2.46 times less risky than GE Aerospace. It trades about 0.05 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 10,351 in GE Aerospace on January 24, 2024 and sell it today you would earn a total of 4,668 from holding GE Aerospace or generate 45.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. GE Aerospace
Performance |
| Timeline |
| iShares MSCI EAFE |
| GE Aerospace |
IShares MSCI and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and GE Aerospace
The main advantage of trading using opposite IShares MSCI and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.| IShares MSCI vs. Dimensional ETF Trust | IShares MSCI vs. Vanguard Small Cap Index | IShares MSCI vs. First Trust Multi Manager | IShares MSCI vs. Vanguard SP Small Cap |
| GE Aerospace vs. Parker Hannifin | GE Aerospace vs. Emerson Electric | GE Aerospace vs. Smith AO | GE Aerospace vs. Oshidori International Holdings |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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