Correlation Between IShares MSCI and Purpose Best

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

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

Diversification Opportunities for IShares MSCI and Purpose Best

0.89

Correlation Coefficient

IShares MSCI  Purpose Best

Very poor diversification

The 3 months correlation between IShares and Purpose is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Purpose Best Ideas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Best Ideas 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 EAFE are associated (or correlated) with Purpose Best. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Best Ideas has no effect on the direction of IShares MSCI i.e., IShares MSCI and Purpose Best go up and down completely randomly.

Pair Corralation between IShares MSCI and Purpose Best

Assuming the 90 days trading horizon IShares MSCI is expected to generate 1.57 times less return on investment than Purpose Best. But when comparing it to its historical volatility, iShares MSCI EAFE is 1.29 times less risky than Purpose Best. It trades about 0.25 of its potential returns per unit of risk. Purpose Best Ideas is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  4,051  in Purpose Best Ideas on April 20, 2025 and sell it today you would earn a total of  799.00  from holding Purpose Best Ideas or generate 19.72% return on investment over 90 days.

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

iShares MSCI EAFE  vs.  Purpose Best Ideas

iShares MSCI EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Purpose Best Ideas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Best Ideas are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Purpose Best displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Purpose Best

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

The idea behind iShares MSCI EAFE and Purpose Best Ideas 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.