Correlation Between Vanguard Bond and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Vanguard Bond 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 Bond 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 Bond Index and iShares MSCI Netherlands, you can compare the effects of market volatilities on Vanguard Bond 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 Bond with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Bond and IShares MSCI.

Diversification Opportunities for Vanguard Bond and IShares MSCI

0.45

Correlation Coefficient

Vanguard Bond  IShares MSCI

Very weak diversification

The 3 months correlation between Vanguard and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Bond Index and iShares MSCI Netherlands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Netherlands and Vanguard Bond 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 Bond Index 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 Netherlands has no effect on the direction of Vanguard Bond i.e., Vanguard Bond and IShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard Bond and IShares MSCI

Assuming the 90 days trading horizon Vanguard Bond Index is expected to under-perform the IShares MSCI. In addition to that, Vanguard Bond is 2.55 times more volatile than iShares MSCI Netherlands. It trades about -0.02 of its total potential returns per unit of risk. iShares MSCI Netherlands is currently generating about 0.11 per unit of volatility. If you would invest  95,200  in iShares MSCI Netherlands on December 23, 2024 and sell it today you would earn a total of  3,300  from holding iShares MSCI Netherlands or generate 3.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.13%
Values	Daily Returns

Vanguard Bond Index  vs.  iShares MSCI Netherlands

Vanguard Bond Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Bond Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Vanguard Bond is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares MSCI Netherlands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Netherlands are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Bond and IShares MSCI

The main advantage of trading using opposite Vanguard Bond and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Bond 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.

The idea behind Vanguard Bond Index and iShares MSCI Netherlands 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.