Correlation Between IShares MSCI and Materials Select
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Materials Select 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 Materials Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Global and Materials Select Sector, you can compare the effects of market volatilities on IShares MSCI and Materials Select 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 Materials Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Materials Select.
Diversification Opportunities for IShares MSCI and Materials Select
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Materials is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and Materials Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Select Sector 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 Global are associated (or correlated) with Materials Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Select Sector has no effect on the direction of IShares MSCI i.e., IShares MSCI and Materials Select go up and down completely randomly.
Pair Corralation between IShares MSCI and Materials Select
Given the investment horizon of 90 days iShares MSCI Global is expected to under-perform the Materials Select. In addition to that, IShares MSCI is 1.03 times more volatile than Materials Select Sector. It trades about -0.03 of its total potential returns per unit of risk. Materials Select Sector is currently generating about 0.04 per unit of volatility. If you would invest 8,984 in Materials Select Sector on April 28, 2024 and sell it today you would earn a total of 149.00 from holding Materials Select Sector or generate 1.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
iShares MSCI Global vs. Materials Select Sector
Performance |
Timeline |
iShares MSCI Global |
Materials Select Sector |
IShares MSCI and Materials Select Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares MSCI and Materials Select
The main advantage of trading using opposite IShares MSCI and Materials Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Materials Select 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 Materials Select will offset losses from the drop in Materials Select's long position.IShares MSCI vs. Vanguard Industrials Index | IShares MSCI vs. Vanguard Communication Services | IShares MSCI vs. Vanguard Consumer Discretionary | IShares MSCI vs. Vanguard Consumer Staples |
Materials Select vs. Vanguard Industrials Index | Materials Select vs. Vanguard Communication Services | Materials Select vs. Vanguard Consumer Discretionary | Materials Select vs. Vanguard Consumer Staples |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |