Correlation Between Vanguard ESG and Xtrackers MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard ESG 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 ESG 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 ESG International and Xtrackers MSCI USA, you can compare the effects of market volatilities on Vanguard ESG 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 ESG with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard ESG and Xtrackers MSCI.
Diversification Opportunities for Vanguard ESG and Xtrackers MSCI
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Xtrackers is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG International and Xtrackers MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI USA and Vanguard ESG 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 ESG International 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 USA has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and Xtrackers MSCI go up and down completely randomly.
Pair Corralation between Vanguard ESG and Xtrackers MSCI
Given the investment horizon of 90 days Vanguard ESG is expected to generate 2.43 times less return on investment than Xtrackers MSCI. But when comparing it to its historical volatility, Vanguard ESG International is 1.0 times less risky than Xtrackers MSCI. It trades about 0.05 of its potential returns per unit of risk. Xtrackers MSCI USA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,893 in Xtrackers MSCI USA on September 2, 2024 and sell it today you would earn a total of 1,703 from holding Xtrackers MSCI USA or generate 43.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard ESG International vs. Xtrackers MSCI USA
Performance |
| Timeline |
| Vanguard ESG Interna |
| Xtrackers MSCI USA |
Vanguard ESG and Xtrackers MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard ESG and Xtrackers MSCI
The main advantage of trading using opposite Vanguard ESG and Xtrackers MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard ESG 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 ESG vs. Vanguard ESG Stock | Vanguard ESG vs. Vanguard ESG Corporate | Vanguard ESG vs. Vanguard International Dividend | Vanguard ESG vs. iShares ESG Aware |
| Xtrackers MSCI vs. iShares ESG MSCI | Xtrackers MSCI vs. Xtrackers SP 500 | Xtrackers MSCI vs. iShares MSCI USA | Xtrackers MSCI vs. Vanguard ESG International |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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