Correlation Between Freedom Day and IShares MSCI

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

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

Diversification Opportunities for Freedom Day and IShares MSCI

0.82

Correlation Coefficient

Freedom Day  IShares MSCI

Very poor diversification

The 3 months correlation between Freedom and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend 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 Freedom Day 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 Freedom Day Dividend 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 Freedom Day i.e., Freedom Day and IShares MSCI go up and down completely randomly.

Pair Corralation between Freedom Day and IShares MSCI

Given the investment horizon of 90 days Freedom Day Dividend is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Freedom Day Dividend is 1.55 times less risky than IShares MSCI. The etf trades about -0.11 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	Strong
Accuracy	100.0%
Values	Daily Returns

Freedom Day Dividend  vs.  iShares MSCI China

Freedom Day Dividend

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Freedom Day may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 Freedom Day and IShares MSCI

The main advantage of trading using opposite Freedom Day and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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 Freedom Day Dividend 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.