Correlation Between Reality Shares and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Reality Shares 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 Reality Shares and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reality Shares DIVS and iShares MSCI China, you can compare the effects of market volatilities on Reality Shares 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 Reality Shares with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reality Shares and IShares MSCI.

Diversification Opportunities for Reality Shares and IShares MSCI

0.54

Correlation Coefficient

Reality Shares  IShares MSCI

Very weak diversification

The 3 months correlation between Reality and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Reality Shares DIVS and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China and Reality Shares 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 Reality Shares DIVS 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 China has no effect on the direction of Reality Shares i.e., Reality Shares and IShares MSCI go up and down completely randomly.

Pair Corralation between Reality Shares and IShares MSCI

Given the investment horizon of 90 days Reality Shares DIVS is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Reality Shares DIVS is 1.3 times less risky than IShares MSCI. The etf trades about -0.07 of its potential returns per unit of risk. The iShares MSCI China is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,958  in iShares MSCI China on January 26, 2024 and sell it today you would earn a total of  176.00  from holding iShares MSCI China or generate 4.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Reality Shares DIVS  vs.  iShares MSCI China

Reality Shares DIVS

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares MSCI China

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Reality Shares and IShares MSCI

The main advantage of trading using opposite Reality Shares and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reality Shares 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.

The idea behind Reality Shares DIVS and iShares MSCI China 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.