Correlation Between IShares MSCI and IXSE

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

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

Diversification Opportunities for IShares MSCI and IXSE

-0.2

Correlation Coefficient

IShares MSCI  IXSE

Good diversification

The 3 months correlation between IShares and IXSE is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI India and IXSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXSE 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 India are associated (or correlated) with IXSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXSE has no effect on the direction of IShares MSCI i.e., IShares MSCI and IXSE go up and down completely randomly.

Pair Corralation between IShares MSCI and IXSE

Given the investment horizon of 90 days iShares MSCI India is expected to generate 0.11 times more return on investment than IXSE. However, iShares MSCI India is 9.36 times less risky than IXSE. It trades about 0.16 of its potential returns per unit of risk. IXSE is currently generating about -0.08 per unit of risk. If you would invest  5,257  in iShares MSCI India on January 26, 2024 and sell it today you would earn a total of  2,218  from holding iShares MSCI India or generate 42.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.62%
Values	Daily Returns

iShares MSCI India  vs.  IXSE

iShares MSCI India

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI India are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

IXSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IXSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IXSE is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and IXSE

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

The idea behind iShares MSCI India and IXSE 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.