Correlation Between IShares MSCI and Power Metal

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

Diversification Opportunities for IShares MSCI and Power Metal

0.58

Correlation Coefficient

IShares MSCI  Power Metal

Very weak diversification

The 3 months correlation between IShares and Power is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of IShares MSCI i.e., IShares MSCI and Power Metal go up and down completely randomly.

Pair Corralation between IShares MSCI and Power Metal

Assuming the 90 days trading horizon iShares MSCI World is expected to generate 0.24 times more return on investment than Power Metal. However, iShares MSCI World is 4.08 times less risky than Power Metal. It trades about 0.32 of its potential returns per unit of risk. Power Metal Resources is currently generating about 0.07 per unit of risk. If you would invest  552,139  in iShares MSCI World on April 20, 2025 and sell it today you would earn a total of  91,661  from holding iShares MSCI World or generate 16.6% return on investment over 90 days.

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

iShares MSCI World  vs.  Power Metal Resources

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 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

Power Metal Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metal Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Power Metal exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Power Metal

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

The idea behind iShares MSCI World and Power Metal Resources 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.