Correlation Between BetaShares Australia and VanEck MSCI

Can any of the company-specific risk be diversified away by investing in both BetaShares Australia and VanEck 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 BetaShares Australia and VanEck MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BetaShares Australia 200 and VanEck MSCI Australian, you can compare the effects of market volatilities on BetaShares Australia and VanEck 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 BetaShares Australia with a short position of VanEck MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Australia and VanEck MSCI.

Diversification Opportunities for BetaShares Australia and VanEck MSCI

0.93

Correlation Coefficient

BetaShares Australia  VanEck MSCI

Almost no diversification

The 3 months correlation between BetaShares and VanEck is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australia 200 and VanEck MSCI Australian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck MSCI Australian and BetaShares Australia 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 BetaShares Australia 200 are associated (or correlated) with VanEck MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck MSCI Australian has no effect on the direction of BetaShares Australia i.e., BetaShares Australia and VanEck MSCI go up and down completely randomly.

Pair Corralation between BetaShares Australia and VanEck MSCI

Assuming the 90 days trading horizon BetaShares Australia is expected to generate 1.33 times less return on investment than VanEck MSCI. But when comparing it to its historical volatility, BetaShares Australia 200 is 1.27 times less risky than VanEck MSCI. It trades about 0.19 of its potential returns per unit of risk. VanEck MSCI Australian is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,033  in VanEck MSCI Australian on September 4, 2024 and sell it today you would earn a total of  287.00  from holding VanEck MSCI Australian or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

BetaShares Australia 200  vs.  VanEck MSCI Australian

BetaShares Australia 200

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BetaShares Australia 200 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BetaShares Australia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck MSCI Australian

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck MSCI Australian are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BetaShares Australia and VanEck MSCI

The main advantage of trading using opposite BetaShares Australia and VanEck MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaShares Australia position performs unexpectedly, VanEck 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 VanEck MSCI will offset losses from the drop in VanEck MSCI's long position.

The idea behind BetaShares Australia 200 and VanEck MSCI Australian pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.