Correlation Between IShares BRIC and VanEck Morningstar

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

By analyzing existing cross correlation between iShares BRIC 50 and VanEck Morningstar Developed, you can compare the effects of market volatilities on IShares BRIC and VanEck Morningstar 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 BRIC with a short position of VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares BRIC and VanEck Morningstar.

Diversification Opportunities for IShares BRIC and VanEck Morningstar

-0.48

Correlation Coefficient

IShares BRIC  VanEck Morningstar

Very good diversification

The 3 months correlation between IShares and VanEck is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares BRIC 50 and VanEck Morningstar Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar and IShares BRIC 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 BRIC 50 are associated (or correlated) with VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar has no effect on the direction of IShares BRIC i.e., IShares BRIC and VanEck Morningstar go up and down completely randomly.

Pair Corralation between IShares BRIC and VanEck Morningstar

Assuming the 90 days trading horizon iShares BRIC 50 is expected to generate 2.69 times more return on investment than VanEck Morningstar. However, IShares BRIC is 2.69 times more volatile than VanEck Morningstar Developed. It trades about 0.06 of its potential returns per unit of risk. VanEck Morningstar Developed is currently generating about 0.08 per unit of risk. If you would invest  1,745  in iShares BRIC 50 on September 29, 2024 and sell it today you would earn a total of  204.00  from holding iShares BRIC 50 or generate 11.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

iShares BRIC 50  vs.  VanEck Morningstar Developed

iShares BRIC 50

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares BRIC 50 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares BRIC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VanEck Morningstar

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar Developed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares BRIC and VanEck Morningstar

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

The idea behind iShares BRIC 50 and VanEck Morningstar Developed 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.