Correlation Between IShares MSCI and Vanguard LifeStrategy
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Vanguard LifeStrategy 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 Vanguard LifeStrategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI World and Vanguard LifeStrategy 80, you can compare the effects of market volatilities on IShares MSCI and Vanguard LifeStrategy 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 Vanguard LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard LifeStrategy.
Diversification Opportunities for IShares MSCI and Vanguard LifeStrategy
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Vanguard LifeStrategy 80 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy 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 World are associated (or correlated) with Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard LifeStrategy go up and down completely randomly.
Pair Corralation between IShares MSCI and Vanguard LifeStrategy
Assuming the 90 days trading horizon iShares MSCI World is expected to generate 1.42 times more return on investment than Vanguard LifeStrategy. However, IShares MSCI is 1.42 times more volatile than Vanguard LifeStrategy 80. It trades about 0.36 of its potential returns per unit of risk. Vanguard LifeStrategy 80 is currently generating about 0.36 per unit of risk. If you would invest 7,174 in iShares MSCI World on September 1, 2024 and sell it today you would earn a total of 534.00 from holding iShares MSCI World or generate 7.44% 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 World vs. Vanguard LifeStrategy 80
Performance |
| Timeline |
| iShares MSCI World |
| Vanguard LifeStrategy |
IShares MSCI and Vanguard LifeStrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Vanguard LifeStrategy
The main advantage of trading using opposite IShares MSCI and Vanguard LifeStrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Vanguard LifeStrategy 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 Vanguard LifeStrategy will offset losses from the drop in Vanguard LifeStrategy's long position.| IShares MSCI vs. iShares Core MSCI | IShares MSCI vs. BlackRock ESG Multi Asset | IShares MSCI vs. Pershing Square Holdings | IShares MSCI vs. ASML Holding NV |
| Vanguard LifeStrategy vs. iShares Core MSCI | Vanguard LifeStrategy vs. BlackRock ESG Multi Asset | Vanguard LifeStrategy vs. Pershing Square Holdings | Vanguard LifeStrategy vs. ASML Holding NV |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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