Correlation Between Vanguard FTSE and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Emerging and iShares MSCI USA, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares MSCI.
Diversification Opportunities for Vanguard FTSE and IShares MSCI
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and IShares is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging 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 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 Emerging 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 FTSE i.e., Vanguard FTSE and IShares MSCI go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares MSCI
Considering the 90-day investment horizon Vanguard FTSE Emerging is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Emerging is 1.47 times less risky than IShares MSCI. The etf trades about -0.2 of its potential returns per unit of risk. The iShares MSCI USA is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 6,681 in iShares MSCI USA on August 29, 2024 and sell it today you would earn a total of 686.00 from holding iShares MSCI USA or generate 10.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Emerging vs. iShares MSCI USA
Performance |
| Timeline |
| Vanguard FTSE Emerging |
| iShares MSCI USA |
Vanguard FTSE and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares MSCI
The main advantage of trading using opposite Vanguard FTSE and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Real Estate | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Total Stock |
| IShares MSCI vs. Vanguard Mid Cap Index | IShares MSCI vs. Vanguard Small Cap Value | IShares MSCI vs. Vanguard FTSE Emerging | IShares MSCI vs. Vanguard Large Cap Index |
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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