Correlation Between IShares MSCI and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Vanguard FTSE 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 IShares MSCI and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Min and Vanguard FTSE Global, you can compare the effects of market volatilities on IShares MSCI and Vanguard FTSE 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 IShares MSCI with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard FTSE.
Diversification Opportunities for IShares MSCI and Vanguard FTSE
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Min and Vanguard FTSE Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Global and IShares MSCI 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 iShares MSCI Min are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Global has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard FTSE go up and down completely randomly.
Pair Corralation between IShares MSCI and Vanguard FTSE
Assuming the 90 days trading horizon IShares MSCI is expected to generate 1.22 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, iShares MSCI Min is 1.32 times less risky than Vanguard FTSE. It trades about 0.39 of its potential returns per unit of risk. Vanguard FTSE Global is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 6,216 in Vanguard FTSE Global on September 3, 2024 and sell it today you would earn a total of 284.00 from holding Vanguard FTSE Global or generate 4.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Min vs. Vanguard FTSE Global
Performance |
| Timeline |
| iShares MSCI Min |
| Vanguard FTSE Global |
IShares MSCI and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Vanguard FTSE
The main advantage of trading using opposite IShares MSCI and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Vanguard FTSE 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 Vanguard FTSE will offset losses from the drop in Vanguard FTSE's long position.| IShares MSCI vs. iShares MSCI Min | IShares MSCI vs. iShares MSCI Canada | IShares MSCI vs. iShares MSCI Min | IShares MSCI vs. iShares MSCI Min |
| Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE vs. Vanguard Canadian Aggregate | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. iShares Core MSCI |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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