Correlation Between Vanguard and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP 500 and iShares MSCI EAFE, you can compare the effects of market volatilities on Vanguard 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 with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and IShares MSCI.
Diversification Opportunities for Vanguard and IShares MSCI
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and IShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and Vanguard 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 SP 500 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 EAFE has no effect on the direction of Vanguard i.e., Vanguard and IShares MSCI go up and down completely randomly.
Pair Corralation between Vanguard and IShares MSCI
Considering the 90-day investment horizon Vanguard SP 500 is expected to generate 0.84 times more return on investment than IShares MSCI. However, Vanguard SP 500 is 1.2 times less risky than IShares MSCI. It trades about 0.13 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.02 per unit of risk. If you would invest 37,083 in Vanguard SP 500 on August 27, 2024 and sell it today you would earn a total of 17,664 from holding Vanguard SP 500 or generate 47.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. iShares MSCI EAFE
Performance |
| Timeline |
| Vanguard SP 500 |
| iShares MSCI EAFE |
Vanguard and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and IShares MSCI
The main advantage of trading using opposite Vanguard and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
| IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares MSCI EAFE | IShares MSCI vs. iShares Russell Mid Cap | IShares MSCI vs. iShares MSCI Netherlands |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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