Correlation Between IShares MSCI and Vanguard Russell
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Vanguard Russell 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 Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Vanguard Russell 2000, you can compare the effects of market volatilities on IShares MSCI and Vanguard Russell 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 Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard Russell.
Diversification Opportunities for IShares MSCI and Vanguard Russell
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and Vanguard is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Vanguard Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Russell 2000 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 EAFE are associated (or correlated) with Vanguard Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Russell 2000 has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard Russell go up and down completely randomly.
Pair Corralation between IShares MSCI and Vanguard Russell
Considering the 90-day investment horizon IShares MSCI is expected to generate 2.77 times less return on investment than Vanguard Russell. But when comparing it to its historical volatility, iShares MSCI EAFE is 1.45 times less risky than Vanguard Russell. It trades about 0.03 of its potential returns per unit of risk. Vanguard Russell 2000 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 17,282 in Vanguard Russell 2000 on September 2, 2024 and sell it today you would earn a total of 5,694 from holding Vanguard Russell 2000 or generate 32.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Vanguard Russell 2000
Performance |
| Timeline |
| iShares MSCI EAFE |
| Vanguard Russell 2000 |
IShares MSCI and Vanguard Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Vanguard Russell
The main advantage of trading using opposite IShares MSCI and Vanguard Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Vanguard Russell 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 Russell will offset losses from the drop in Vanguard Russell's long position.| IShares MSCI vs. Dimensional ETF Trust | IShares MSCI vs. Vanguard Small Cap Index | IShares MSCI vs. First Trust Multi Manager | IShares MSCI vs. Vanguard SP Small Cap |
| Vanguard Russell vs. iShares SP Mid Cap | Vanguard Russell vs. iShares SP Small Cap | Vanguard Russell vs. iShares SP Mid Cap | Vanguard Russell vs. iShares SP 500 |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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