Correlation Between BetaShares Australia and Vanguard MSCI

Can any of the company-specific risk be diversified away by investing in both BetaShares Australia and Vanguard 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 Vanguard 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 Vanguard MSCI International, you can compare the effects of market volatilities on BetaShares Australia and Vanguard 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 Vanguard MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaShares Australia and Vanguard MSCI.

Diversification Opportunities for BetaShares Australia and Vanguard MSCI

0.73

Correlation Coefficient

BetaShares Australia  Vanguard MSCI

Poor diversification

The 3 months correlation between BetaShares and Vanguard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BetaShares Australia 200 and Vanguard MSCI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard MSCI Intern 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 Vanguard MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard MSCI Intern has no effect on the direction of BetaShares Australia i.e., BetaShares Australia and Vanguard MSCI go up and down completely randomly.

Pair Corralation between BetaShares Australia and Vanguard MSCI

Assuming the 90 days trading horizon BetaShares Australia 200 is expected to under-perform the Vanguard MSCI. But the etf apears to be less risky and, when comparing its historical volatility, BetaShares Australia 200 is 1.2 times less risky than Vanguard MSCI. The etf trades about -0.06 of its potential returns per unit of risk. The Vanguard MSCI International is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,697  in Vanguard MSCI International on December 2, 2024 and sell it today you would lose (68.00) from holding Vanguard MSCI International or give up 0.64% of portfolio value over 90 days.

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

BetaShares Australia 200  vs.  Vanguard MSCI International

BetaShares Australia 200

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaShares Australia 200 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BetaShares Australia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard MSCI Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard MSCI International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BetaShares Australia and Vanguard MSCI

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

The idea behind BetaShares Australia 200 and Vanguard MSCI International 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.