Correlation Between IShares MSCI and Exchange Traded

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

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

Diversification Opportunities for IShares MSCI and Exchange Traded

-0.48

Correlation Coefficient

IShares MSCI  Exchange Traded

Very good diversification

The 3 months correlation between IShares and Exchange is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 World are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of IShares MSCI i.e., IShares MSCI and Exchange Traded go up and down completely randomly.

Pair Corralation between IShares MSCI and Exchange Traded

Given the investment horizon of 90 days iShares MSCI World is expected to generate 5.74 times more return on investment than Exchange Traded. However, IShares MSCI is 5.74 times more volatile than Exchange Traded Concepts. It trades about 0.28 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.05 per unit of risk. If you would invest  2,512  in iShares MSCI World on April 28, 2025 and sell it today you would earn a total of  360.00  from holding iShares MSCI World or generate 14.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	39.68%
Values	Daily Returns

iShares MSCI World  vs.  Exchange Traded Concepts

iShares MSCI World

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI World are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal primary indicators, IShares MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Exchange Traded Concepts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Traded Concepts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Exchange Traded is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares MSCI and Exchange Traded

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

The idea behind iShares MSCI World and Exchange Traded Concepts 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.