Correlation Between Vanguard Canadian and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Canadian and IShares MSCI 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 Vanguard Canadian and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Canadian Aggregate and iShares MSCI World, you can compare the effects of market volatilities on Vanguard Canadian and IShares MSCI 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 Vanguard Canadian with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Canadian and IShares MSCI.
Diversification Opportunities for Vanguard Canadian and IShares MSCI
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and IShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Canadian Aggregate and iShares MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI World and Vanguard Canadian 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 Vanguard Canadian Aggregate are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI World has no effect on the direction of Vanguard Canadian i.e., Vanguard Canadian and IShares MSCI go up and down completely randomly.
Pair Corralation between Vanguard Canadian and IShares MSCI
Assuming the 90 days trading horizon Vanguard Canadian is expected to generate 5.4 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Vanguard Canadian Aggregate is 1.42 times less risky than IShares MSCI. It trades about 0.03 of its potential returns per unit of risk. iShares MSCI World is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,462 in iShares MSCI World on August 30, 2024 and sell it today you would earn a total of 3,158 from holding iShares MSCI World or generate 48.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Canadian Aggregate vs. iShares MSCI World
Performance |
| Timeline |
| Vanguard Canadian |
| iShares MSCI World |
Vanguard Canadian and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Canadian and IShares MSCI
The main advantage of trading using opposite Vanguard Canadian and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Canadian position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.| Vanguard Canadian vs. Vanguard Canadian Short | Vanguard Canadian vs. Vanguard FTSE Canada | Vanguard Canadian vs. Vanguard FTSE Global | Vanguard Canadian vs. Vanguard FTSE Emerging |
| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI Min | IShares MSCI vs. iShares Canadian Value | IShares MSCI vs. iShares SPTSX Small |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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