Correlation Between Vanguard Funds and IShares MSCI

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

By analyzing existing cross correlation between Vanguard Funds PLC and iShares MSCI World, you can compare the effects of market volatilities on Vanguard Funds and IShares MSCI 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 Vanguard Funds with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and IShares MSCI.

Diversification Opportunities for Vanguard Funds and IShares MSCI

-0.82

Correlation Coefficient

Vanguard Funds  IShares MSCI

Pay attention - limited upside

The 3 months correlation between Vanguard and IShares is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds PLC and iShares MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI World and Vanguard Funds 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 Vanguard Funds PLC are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI World has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and IShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard Funds and IShares MSCI

Assuming the 90 days trading horizon Vanguard Funds PLC is expected to generate 0.13 times more return on investment than IShares MSCI. However, Vanguard Funds PLC is 7.46 times less risky than IShares MSCI. It trades about 0.21 of its potential returns per unit of risk. iShares MSCI World is currently generating about -0.25 per unit of risk. If you would invest  560.00  in Vanguard Funds PLC on September 23, 2024 and sell it today you would earn a total of  3.00  from holding Vanguard Funds PLC or generate 0.54% return on investment over 90 days.

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

Vanguard Funds PLC  vs.  iShares MSCI World

Vanguard Funds PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares MSCI World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Vanguard Funds and IShares MSCI

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

The idea behind Vanguard Funds PLC and iShares MSCI World 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.