Correlation Between IShares MSCI and VictoryShares WestEnd

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

Diversification Opportunities for IShares MSCI and VictoryShares WestEnd

0.95

Correlation Coefficient

IShares MSCI  VictoryShares WestEnd

Almost no diversification

The 3 months correlation between IShares and VictoryShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI and VictoryShares WestEnd Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares WestEnd 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 VictoryShares WestEnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares WestEnd has no effect on the direction of IShares MSCI i.e., IShares MSCI and VictoryShares WestEnd go up and down completely randomly.

Pair Corralation between IShares MSCI and VictoryShares WestEnd

Given the investment horizon of 90 days iShares MSCI ACWI is expected to generate 1.01 times more return on investment than VictoryShares WestEnd. However, IShares MSCI is 1.01 times more volatile than VictoryShares WestEnd Global. It trades about 0.17 of its potential returns per unit of risk. VictoryShares WestEnd Global is currently generating about 0.12 per unit of risk. If you would invest  18,768  in iShares MSCI ACWI on September 2, 2024 and sell it today you would earn a total of  1,321  from holding iShares MSCI ACWI or generate 7.04% return on investment over 90 days.

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

iShares MSCI ACWI  vs.  VictoryShares WestEnd Global

iShares MSCI ACWI

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI ACWI are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental drivers, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VictoryShares WestEnd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares WestEnd Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, VictoryShares WestEnd is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares MSCI and VictoryShares WestEnd

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

The idea behind iShares MSCI ACWI and VictoryShares WestEnd Global 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.