Correlation Between IShares MSCI and Listed Funds

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

By analyzing existing cross correlation between iShares MSCI China and Listed Funds Trust, you can compare the effects of market volatilities on IShares MSCI and Listed Funds 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 Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Listed Funds.

Diversification Opportunities for IShares MSCI and Listed Funds

0.78

Correlation Coefficient

IShares MSCI  Listed Funds

Poor diversification

The 3 months correlation between IShares and Listed is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust 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 China are associated (or correlated) with Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of IShares MSCI i.e., IShares MSCI and Listed Funds go up and down completely randomly.

Pair Corralation between IShares MSCI and Listed Funds

Given the investment horizon of 90 days iShares MSCI China is expected to generate 1.68 times more return on investment than Listed Funds. However, IShares MSCI is 1.68 times more volatile than Listed Funds Trust. It trades about 0.19 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.0 per unit of risk. If you would invest  3,945  in iShares MSCI China on January 25, 2024 and sell it today you would earn a total of  177.00  from holding iShares MSCI China or generate 4.49% return on investment over 90 days.

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

iShares MSCI China  vs.  Listed Funds Trust

iShares MSCI China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 5 (%) 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.

Listed Funds Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Listed Funds is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Listed Funds

The main advantage of trading using opposite IShares MSCI and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Listed Funds 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 Listed Funds will offset losses from the drop in Listed Funds' long position.

The idea behind iShares MSCI China and Listed Funds Trust 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.