Correlation Between IShares MSCI and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Xtrackers 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 IShares MSCI and Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on IShares MSCI and Xtrackers 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 IShares MSCI with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Xtrackers MSCI.
Diversification Opportunities for IShares MSCI and Xtrackers MSCI
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Xtrackers is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE 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 EAFE are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of IShares MSCI i.e., IShares MSCI and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between IShares MSCI and Xtrackers MSCI
Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.05 times more return on investment than Xtrackers MSCI. However, IShares MSCI is 1.05 times more volatile than Xtrackers MSCI EAFE. It trades about 0.05 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about 0.05 per unit of risk. If you would invest 5,408 in iShares MSCI EAFE on February 4, 2024 and sell it today you would earn a total of 48.50 from holding iShares MSCI EAFE or generate 0.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares MSCI EAFE vs. Xtrackers MSCI EAFE
Performance |
Timeline |
iShares MSCI EAFE |
Xtrackers MSCI EAFE |
IShares MSCI and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares MSCI and Xtrackers MSCI
The main advantage of trading using opposite IShares MSCI and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Xtrackers 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.IShares MSCI vs. VanEck Morningstar Wide | IShares MSCI vs. VanEck LongFlat Trend | IShares MSCI vs. Invesco International BuyBack | IShares MSCI vs. VanEck Israel ETF |
Xtrackers MSCI vs. VanEck Morningstar Wide | Xtrackers MSCI vs. VanEck LongFlat Trend | Xtrackers MSCI vs. Invesco International BuyBack | Xtrackers MSCI vs. VanEck Israel ETF |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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