Correlation Between IShares MSCI and IQ Merger

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IQ Merger 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 IQ Merger 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 IQ Merger Arbitrage, you can compare the effects of market volatilities on IShares MSCI and IQ Merger 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 IQ Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IQ Merger.

Diversification Opportunities for IShares MSCI and IQ Merger

0.76

Correlation Coefficient

IShares MSCI  IQ Merger

Poor diversification

The 3 months correlation between IShares and MNA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and IQ Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Merger Arbitrage 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 IQ Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Merger Arbitrage has no effect on the direction of IShares MSCI i.e., IShares MSCI and IQ Merger go up and down completely randomly.

Pair Corralation between IShares MSCI and IQ Merger

Given the investment horizon of 90 days iShares MSCI World is expected to generate 3.19 times more return on investment than IQ Merger. However, IShares MSCI is 3.19 times more volatile than IQ Merger Arbitrage. It trades about 0.26 of its potential returns per unit of risk. IQ Merger Arbitrage is currently generating about 0.2 per unit of risk. If you would invest  2,517  in iShares MSCI World on May 1, 2025 and sell it today you would earn a total of  334.00  from holding iShares MSCI World or generate 13.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

iShares MSCI World  vs.  IQ Merger Arbitrage

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 20 (%) 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.

IQ Merger Arbitrage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Merger Arbitrage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IQ Merger is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and IQ Merger

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

The idea behind iShares MSCI World and IQ Merger Arbitrage 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.