Correlation Between Vanguard FTSE and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Xtrackers 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 FTSE and Xtrackers MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Europe and Xtrackers MSCI Europe, you can compare the effects of market volatilities on Vanguard FTSE and Xtrackers 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 FTSE with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Xtrackers MSCI.
Diversification Opportunities for Vanguard FTSE and Xtrackers MSCI
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Xtrackers is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Europe and Xtrackers MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI Europe and Vanguard FTSE 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 FTSE Europe are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI Europe has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between Vanguard FTSE and Xtrackers MSCI
Considering the 90-day investment horizon Vanguard FTSE is expected to generate 1.1 times less return on investment than Xtrackers MSCI. In addition to that, Vanguard FTSE is 1.27 times more volatile than Xtrackers MSCI Europe. It trades about 0.05 of its total potential returns per unit of risk. Xtrackers MSCI Europe is currently generating about 0.07 per unit of volatility. If you would invest 3,280 in Xtrackers MSCI Europe on August 29, 2024 and sell it today you would earn a total of 832.00 from holding Xtrackers MSCI Europe or generate 25.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Europe vs. Xtrackers MSCI Europe
Performance |
| Timeline |
| Vanguard FTSE Europe |
| Xtrackers MSCI Europe |
Vanguard FTSE and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and Xtrackers MSCI
The main advantage of trading using opposite Vanguard FTSE and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Xtrackers 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 Xtrackers MSCI will offset losses from the drop in Xtrackers MSCI's long position.| Vanguard FTSE vs. Vanguard FTSE Pacific | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard FTSE Developed |
| Xtrackers MSCI vs. Xtrackers MSCI Japan | Xtrackers MSCI vs. iShares Currency Hedged | Xtrackers MSCI vs. Xtrackers MSCI EAFE | Xtrackers MSCI vs. WisdomTree Europe Hedged |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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