Correlation Between IShares MSCI and Global Quality

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

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

Diversification Opportunities for IShares MSCI and Global Quality

-0.02

Correlation Coefficient

IShares MSCI  Global Quality

Good diversification

The 3 months correlation between IShares and Global is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Turkey and Global Quality Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Quality Portfolio 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 Turkey are associated (or correlated) with Global Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Quality Portfolio has no effect on the direction of IShares MSCI i.e., IShares MSCI and Global Quality go up and down completely randomly.

Pair Corralation between IShares MSCI and Global Quality

Considering the 90-day investment horizon iShares MSCI Turkey is expected to generate 2.14 times more return on investment than Global Quality. However, IShares MSCI is 2.14 times more volatile than Global Quality Portfolio. It trades about 0.19 of its potential returns per unit of risk. Global Quality Portfolio is currently generating about -0.15 per unit of risk. If you would invest  3,589  in iShares MSCI Turkey on January 25, 2024 and sell it today you would earn a total of  239.00  from holding iShares MSCI Turkey or generate 6.66% return on investment over 90 days.

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

iShares MSCI Turkey  vs.  Global Quality Portfolio

iShares MSCI Turkey

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Turkey are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Global Quality Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares MSCI and Global Quality

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

The idea behind iShares MSCI Turkey and Global Quality Portfolio 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.