Correlation Between IShares MSCI and Thrivent High

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

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

Diversification Opportunities for IShares MSCI and Thrivent High

0.67

Correlation Coefficient

IShares MSCI  Thrivent High

Poor diversification

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

Pair Corralation between IShares MSCI and Thrivent High

Given the investment horizon of 90 days iShares MSCI USA is expected to generate 4.51 times more return on investment than Thrivent High. However, IShares MSCI is 4.51 times more volatile than Thrivent High Yield. It trades about 0.16 of its potential returns per unit of risk. Thrivent High Yield is currently generating about 0.15 per unit of risk. If you would invest  17,342  in iShares MSCI USA on September 2, 2024 and sell it today you would earn a total of  1,187  from holding iShares MSCI USA or generate 6.84% return on investment over 90 days.

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

iShares MSCI USA  vs.  Thrivent High Yield

iShares MSCI USA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thrivent High Yield

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent High Yield are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thrivent High 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 Thrivent High

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

The idea behind iShares MSCI USA and Thrivent High Yield 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.