Correlation Between IShares MSCI and IShares STOXX

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

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

Diversification Opportunities for IShares MSCI and IShares STOXX

0.8

Correlation Coefficient

IShares MSCI  IShares STOXX

Very poor diversification

The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe 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 Global are associated (or correlated) with IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares STOXX go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares STOXX

Assuming the 90 days trading horizon iShares MSCI Global is expected to generate 1.54 times more return on investment than IShares STOXX. However, IShares MSCI is 1.54 times more volatile than iShares STOXX Europe. It trades about 0.28 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about 0.13 per unit of risk. If you would invest  625.00  in iShares MSCI Global on April 24, 2025 and sell it today you would earn a total of  211.00  from holding iShares MSCI Global or generate 33.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares MSCI Global  vs.  iShares STOXX Europe

iShares MSCI Global

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Global are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares MSCI unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares STOXX Europe

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares STOXX Europe are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares STOXX may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares MSCI and IShares STOXX

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

The idea behind iShares MSCI Global and iShares STOXX Europe 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 Commodity Directory module to find actively traded commodities issued by global exchanges.