Correlation Between IShares MSCI and Utilities Select

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

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

Diversification Opportunities for IShares MSCI and Utilities Select

0.24

Correlation Coefficient

IShares MSCI  Utilities Select

Modest diversification

The 3 months correlation between IShares and Utilities is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector 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 ACWI are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of IShares MSCI i.e., IShares MSCI and Utilities Select go up and down completely randomly.

Pair Corralation between IShares MSCI and Utilities Select

Given the investment horizon of 90 days IShares MSCI is expected to generate 1.01 times less return on investment than Utilities Select. But when comparing it to its historical volatility, iShares MSCI ACWI is 1.07 times less risky than Utilities Select. It trades about 0.08 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,991  in Utilities Select Sector on September 14, 2025 and sell it today you would earn a total of  1,292  from holding Utilities Select Sector or generate 43.2% return on investment over 90 days.

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

iShares MSCI ACWI  vs.  Utilities Select Sector

iShares MSCI ACWI

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI ACWI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Utilities Select Sector

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Select Sector are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Utilities Select 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 Utilities Select

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

The idea behind iShares MSCI ACWI and Utilities Select Sector 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.