Correlation Between IShares SMI and IShares MSCI

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

By analyzing existing cross correlation between iShares SMI ETF and iShares MSCI Global, you can compare the effects of market volatilities on IShares SMI and IShares 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 SMI with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SMI and IShares MSCI.

Diversification Opportunities for IShares SMI and IShares MSCI

-0.67

Correlation Coefficient

IShares SMI  IShares MSCI

Excellent diversification

The 3 months correlation between IShares and IShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares SMI ETF and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global and IShares SMI 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 SMI ETF are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Global has no effect on the direction of IShares SMI i.e., IShares SMI and IShares MSCI go up and down completely randomly.

Pair Corralation between IShares SMI and IShares MSCI

Assuming the 90 days trading horizon iShares SMI ETF is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, iShares SMI ETF is 2.28 times less risky than IShares MSCI. The etf trades about -0.07 of its potential returns per unit of risk. The iShares MSCI Global is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  734.00  in iShares MSCI Global on May 13, 2025 and sell it today you would earn a total of  102.00  from holding iShares MSCI Global or generate 13.9% return on investment over 90 days.

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

iShares SMI ETF  vs.  iShares MSCI Global

iShares SMI ETF

Risk-Adjusted Performance

Weakest

Over the last 90 days iShares SMI ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares SMI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, IShares MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SMI and IShares MSCI

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

The idea behind iShares SMI ETF and iShares MSCI Global 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.