Correlation Between Xtrackers MSCI and Vanguard
Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI and Vanguard 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 Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers MSCI USA and Vanguard SP 500, you can compare the effects of market volatilities on Xtrackers MSCI and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and Vanguard.
Diversification Opportunities for Xtrackers MSCI and Vanguard
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Xtrackers and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI USA and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 USA are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Vanguard go up and down completely randomly.
Pair Corralation between Xtrackers MSCI and Vanguard
Given the investment horizon of 90 days Xtrackers MSCI is expected to generate 1.12 times less return on investment than Vanguard. In addition to that, Xtrackers MSCI is 1.12 times more volatile than Vanguard SP 500. It trades about 0.09 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.11 per unit of volatility. If you would invest 49,960 in Vanguard SP 500 on September 13, 2024 and sell it today you would earn a total of 5,770 from holding Vanguard SP 500 or generate 11.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Xtrackers MSCI USA vs. Vanguard SP 500
Performance |
| Timeline |
| Xtrackers MSCI USA |
| Vanguard SP 500 |
Xtrackers MSCI and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers MSCI and Vanguard
The main advantage of trading using opposite Xtrackers MSCI and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI position performs unexpectedly, Vanguard 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 will offset losses from the drop in Vanguard's long position.| Xtrackers MSCI vs. iShares ESG MSCI | Xtrackers MSCI vs. Xtrackers SP 500 | Xtrackers MSCI vs. iShares MSCI USA | Xtrackers MSCI vs. Vanguard ESG International |
| Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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