Correlation Between IShares MSCI and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Vanguard Total 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 Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI USA and Vanguard Total Market, you can compare the effects of market volatilities on IShares MSCI and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard Total.
Diversification Opportunities for IShares MSCI and Vanguard Total
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market 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 USA are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard Total go up and down completely randomly.
Pair Corralation between IShares MSCI and Vanguard Total
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.27 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, iShares MSCI USA is 1.27 times less risky than Vanguard Total. It trades about 0.2 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 10,169 in Vanguard Total Market on August 27, 2024 and sell it today you would earn a total of 386.00 from holding Vanguard Total Market or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI USA vs. Vanguard Total Market
Performance |
| Timeline |
| iShares MSCI USA |
| Vanguard Total Market |
IShares MSCI and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Vanguard Total
The main advantage of trading using opposite IShares MSCI and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| IShares MSCI vs. Morningstar Unconstrained Allocation | IShares MSCI vs. High Yield Municipal Fund | IShares MSCI vs. Via Renewables | IShares MSCI vs. Knife River |
| Vanguard Total vs. Vanguard FTSE Developed | Vanguard Total vs. iShares Core Canadian | Vanguard Total vs. BMO Long Federal | Vanguard Total vs. Vanguard FTSE Canada |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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