Correlation Between Vanguard Minimum and IShares MSCI

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Can any of the company-specific risk be diversified away by investing in both Vanguard Minimum 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 Minimum 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 Minimum Volatility and iShares MSCI USA, you can compare the effects of market volatilities on Vanguard Minimum 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 Minimum with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Minimum and IShares MSCI.

Diversification Opportunities for Vanguard Minimum 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 Minimum Volatility 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 Minimum 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 Minimum Volatility 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 Minimum i.e., Vanguard Minimum and IShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard Minimum and IShares MSCI

Given the investment horizon of 90 days Vanguard Minimum Volatility is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Minimum Volatility is 1.19 times less risky than IShares MSCI. The etf trades about -0.03 of its potential returns per unit of risk. The iShares MSCI USA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  15,517  in iShares MSCI USA on September 14, 2024 and sell it today you would earn a total of  20.00  from holding iShares MSCI USA or generate 0.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Vanguard Minimum Volatility  vs.  iShares MSCI USA

 Performance 
       Timeline  
Vanguard Minimum Vol 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Minimum Volatility are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vanguard Minimum is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
iShares MSCI USA 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Minimum and IShares MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Minimum and IShares MSCI

The main advantage of trading using opposite Vanguard Minimum and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Minimum 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.
The idea behind Vanguard Minimum Volatility and iShares MSCI USA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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