Correlation Between Vanguard Funds and Xtrackers MSCI

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

By analyzing existing cross correlation between Vanguard Funds Public and Xtrackers MSCI Pakistan, you can compare the effects of market volatilities on Vanguard Funds and Xtrackers 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 Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and Xtrackers MSCI.

Diversification Opportunities for Vanguard Funds and Xtrackers MSCI

0.96

Correlation Coefficient

Vanguard Funds  Xtrackers MSCI

Almost no diversification

The 3 months correlation between Vanguard and Xtrackers is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and Xtrackers MSCI Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Pakistan 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 Public are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Pakistan has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Vanguard Funds and Xtrackers MSCI

Assuming the 90 days trading horizon Vanguard Funds is expected to generate 1.82 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, Vanguard Funds Public is 1.66 times less risky than Xtrackers MSCI. It trades about 0.23 of its potential returns per unit of risk. Xtrackers MSCI Pakistan is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  87.00  in Xtrackers MSCI Pakistan on September 3, 2024 and sell it today you would earn a total of  23.00  from holding Xtrackers MSCI Pakistan or generate 26.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Vanguard Funds Public  vs.  Xtrackers MSCI Pakistan

Vanguard Funds Public

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Vanguard Funds reported solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers MSCI Pakistan

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Pakistan are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Xtrackers MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Funds and Xtrackers MSCI

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

The idea behind Vanguard Funds Public and Xtrackers MSCI Pakistan 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.