Correlation Between Vanguard Multifactor and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard Multifactor 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 Multifactor 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 Multifactor and iShares MSCI USA, you can compare the effects of market volatilities on Vanguard Multifactor 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 Multifactor with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Multifactor and IShares MSCI.
Diversification Opportunities for Vanguard Multifactor and IShares MSCI
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Multifactor and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA and Vanguard Multifactor 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 Multifactor 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 USA has no effect on the direction of Vanguard Multifactor i.e., Vanguard Multifactor and IShares MSCI go up and down completely randomly.
Pair Corralation between Vanguard Multifactor and IShares MSCI
Given the investment horizon of 90 days Vanguard Multifactor is expected to generate 1.14 times more return on investment than IShares MSCI. However, Vanguard Multifactor is 1.14 times more volatile than iShares MSCI USA. It trades about 0.08 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.08 per unit of risk. If you would invest 9,621 in Vanguard Multifactor on September 13, 2024 and sell it today you would earn a total of 4,179 from holding Vanguard Multifactor or generate 43.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Multifactor vs. iShares MSCI USA
Performance |
| Timeline |
| Vanguard Multifactor |
| iShares MSCI USA |
Vanguard Multifactor and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Multifactor and IShares MSCI
The main advantage of trading using opposite Vanguard Multifactor and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Multifactor 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 Multifactor vs. Vanguard Quality Factor | Vanguard Multifactor vs. Vanguard Momentum Factor | Vanguard Multifactor vs. Vanguard Value Factor | Vanguard Multifactor vs. Vanguard Minimum Volatility |
| IShares MSCI vs. Vanguard Momentum Factor | IShares MSCI vs. Vanguard Multifactor | IShares MSCI vs. Vanguard Value Factor | IShares MSCI vs. Vanguard Minimum Volatility |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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