Correlation Between IShares International and VanEck Morningstar
Can any of the company-specific risk be diversified away by investing in both IShares International 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 International 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 International Select and VanEck Morningstar International, you can compare the effects of market volatilities on IShares International 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 International with a short position of VanEck Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares International and VanEck Morningstar.
Diversification Opportunities for IShares International and VanEck Morningstar
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and VanEck is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares International Select and VanEck Morningstar Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar and IShares International 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 International Select 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 International i.e., IShares International and VanEck Morningstar go up and down completely randomly.
Pair Corralation between IShares International and VanEck Morningstar
Considering the 90-day investment horizon iShares International Select is expected to generate 0.89 times more return on investment than VanEck Morningstar. However, iShares International Select is 1.13 times less risky than VanEck Morningstar. It trades about 0.01 of its potential returns per unit of risk. VanEck Morningstar International is currently generating about -0.02 per unit of risk. If you would invest 2,866 in iShares International Select on September 1, 2024 and sell it today you would earn a total of 6.00 from holding iShares International Select or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares International Select vs. VanEck Morningstar Internation
Performance |
| Timeline |
| iShares International |
| VanEck Morningstar |
IShares International and VanEck Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares International and VanEck Morningstar
The main advantage of trading using opposite IShares International and VanEck Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares International 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 International Select and VanEck Morningstar International 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.
| VanEck Morningstar vs. Schwab Fundamental Small | VanEck Morningstar vs. Schwab Fundamental Large | VanEck Morningstar vs. Schwab Fundamental International | VanEck Morningstar vs. Schwab Fundamental Emerging |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |