Correlation Between Xtrackers MSCI and VanEck Morningstar
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI 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 Xtrackers MSCI and VanEck Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI EAFE and VanEck Morningstar International, you can compare the effects of market volatilities on Xtrackers MSCI 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 Xtrackers MSCI with a short position of VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and VanEck Morningstar.
Diversification Opportunities for Xtrackers MSCI and VanEck Morningstar
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Xtrackers and VanEck is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and VanEck Morningstar Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar and Xtrackers 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 Xtrackers MSCI EAFE 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 Xtrackers MSCI i.e., Xtrackers MSCI and VanEck Morningstar go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and VanEck Morningstar
Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 1.4 times less return on investment than VanEck Morningstar. But when comparing it to its historical volatility, Xtrackers MSCI EAFE is 1.18 times less risky than VanEck Morningstar. It trades about 0.28 of its potential returns per unit of risk. VanEck Morningstar International is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,995 in VanEck Morningstar International on November 3, 2024 and sell it today you would earn a total of 205.00 from holding VanEck Morningstar International or generate 6.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers MSCI EAFE vs. VanEck Morningstar Internation
Performance |
| Timeline |
| Xtrackers MSCI EAFE |
| VanEck Morningstar |
Xtrackers MSCI and VanEck Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and VanEck Morningstar
The main advantage of trading using opposite Xtrackers MSCI and VanEck Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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.| Xtrackers MSCI vs. Fidelity International High | Xtrackers MSCI vs. Global X MSCI | Xtrackers MSCI vs. Xtrackers USD High | Xtrackers MSCI vs. First Trust Dow |
| VanEck Morningstar vs. VanEck Morningstar Wide | VanEck Morningstar vs. FlexShares International Quality | VanEck Morningstar vs. VanEck LongFlat Trend | VanEck Morningstar vs. Invesco International BuyBack |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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