Correlation Between IShares MSCI and Strategy Shares

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

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

Diversification Opportunities for IShares MSCI and Strategy Shares

0.11

Correlation Coefficient

IShares MSCI  Strategy Shares

Average diversification

The 3 months correlation between IShares and Strategy is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares 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 China are associated (or correlated) with Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of IShares MSCI i.e., IShares MSCI and Strategy Shares go up and down completely randomly.

Pair Corralation between IShares MSCI and Strategy Shares

Given the investment horizon of 90 days IShares MSCI is expected to generate 123.55 times less return on investment than Strategy Shares. But when comparing it to its historical volatility, iShares MSCI China is 59.74 times less risky than Strategy Shares. It trades about 0.07 of its potential returns per unit of risk. Strategy Shares is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Strategy Shares on January 27, 2025 and sell it today you would earn a total of  2,420  from holding Strategy Shares or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.69%
Values	Daily Returns

iShares MSCI China  vs.  Strategy Shares

iShares MSCI China

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Strategy Shares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Strategy Shares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Strategy Shares

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

The idea behind iShares MSCI China and Strategy Shares 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.