Correlation Between IShares MSCI and SPAC

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

Diversification Opportunities for IShares MSCI and SPAC

0.29

Correlation Coefficient

IShares MSCI  SPAC

Modest diversification

The 3 months correlation between IShares and SPAC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and SPAC and New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPAC and New 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 SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPAC and New has no effect on the direction of IShares MSCI i.e., IShares MSCI and SPAC go up and down completely randomly.

Pair Corralation between IShares MSCI and SPAC

Given the investment horizon of 90 days iShares MSCI World is expected to generate 0.73 times more return on investment than SPAC. However, iShares MSCI World is 1.36 times less risky than SPAC. It trades about 0.29 of its potential returns per unit of risk. SPAC and New is currently generating about 0.08 per unit of risk. If you would invest  2,519  in iShares MSCI World on April 29, 2025 and sell it today you would earn a total of  363.00  from holding iShares MSCI World or generate 14.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

iShares MSCI World  vs.  SPAC and New

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.

SPAC and New

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPAC and New are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, SPAC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and SPAC

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

The idea behind iShares MSCI World and SPAC and New 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.