Correlation Between IShares MSCI and Parnassus Core

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

Diversification Opportunities for IShares MSCI and Parnassus Core

0.98

Correlation Coefficient

IShares MSCI  Parnassus Core

Almost no diversification

The 3 months correlation between IShares and Parnassus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Parnassus Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Core Select 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 Parnassus Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Core Select has no effect on the direction of IShares MSCI i.e., IShares MSCI and Parnassus Core go up and down completely randomly.

Pair Corralation between IShares MSCI and Parnassus Core

Given the investment horizon of 90 days iShares MSCI World is expected to generate 1.1 times more return on investment than Parnassus Core. However, IShares MSCI is 1.1 times more volatile than Parnassus Core Select. It trades about 0.26 of its potential returns per unit of risk. Parnassus Core Select is currently generating about 0.27 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares MSCI World  vs.  Parnassus Core Select

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.

Parnassus Core Select

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus Core Select are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Parnassus Core may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares MSCI and Parnassus Core

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

The idea behind iShares MSCI World and Parnassus Core Select 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.