Correlation Between IShares MSCI and QSY

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

Diversification Opportunities for IShares MSCI and QSY

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between IShares and QSY is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI EAFE and QSY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QSY 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 QSY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QSY has no effect on the direction of IShares MSCI i.e., IShares MSCI and QSY go up and down completely randomly.

Pair Corralation between IShares MSCI and QSY

Considering the 90-day investment horizon IShares MSCI EAFE is expected to generate 0.72 times more return on investment than QSY. However, IShares MSCI EAFE is 1.39 times less risky than QSY. It trades about 0.01 of its potential returns per unit of risk. QSY is currently generating about -0.01 per unit of risk. If you would invest  6,137  in IShares MSCI EAFE on December 30, 2023 and sell it today you would earn a total of  196.00  from holding IShares MSCI EAFE or generate 3.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy30.77%
ValuesDaily Returns

IShares MSCI EAFE  vs.  QSY

 Performance 
       Timeline  
IShares MSCI EAFE 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Solid
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 strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
QSY 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days QSY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, QSY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

IShares MSCI and QSY Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and QSY

The main advantage of trading using opposite IShares MSCI and QSY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, QSY 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 QSY will offset losses from the drop in QSY's long position.
The idea behind IShares MSCI EAFE and QSY 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.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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