Correlation Between VanEck Brazil and IShares MSCI

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

By analyzing existing cross correlation between VanEck Brazil Small Cap and iShares MSCI Peru, you can compare the effects of market volatilities on VanEck Brazil 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 VanEck Brazil with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Brazil and IShares MSCI.

Diversification Opportunities for VanEck Brazil and IShares MSCI

0.69

Correlation Coefficient

VanEck Brazil  IShares MSCI

Poor diversification

The 3 months correlation between VanEck and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Brazil Small Cap and iShares MSCI Peru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Peru and VanEck Brazil 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 VanEck Brazil Small Cap 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 Peru has no effect on the direction of VanEck Brazil i.e., VanEck Brazil and IShares MSCI go up and down completely randomly.

Pair Corralation between VanEck Brazil and IShares MSCI

Considering the 90-day investment horizon VanEck Brazil Small Cap is expected to under-perform the IShares MSCI. In addition to that, VanEck Brazil is 1.32 times more volatile than iShares MSCI Peru. It trades about -0.13 of its total potential returns per unit of risk. iShares MSCI Peru is currently generating about 0.03 per unit of volatility. If you would invest  4,018  in iShares MSCI Peru on December 5, 2024 and sell it today you would earn a total of  26.00  from holding iShares MSCI Peru or generate 0.65% return on investment over 90 days.

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

VanEck Brazil Small Cap  vs.  iShares MSCI Peru

VanEck Brazil Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Brazil Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Brazil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares MSCI Peru

Risk-Adjusted Performance

Very Weak

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

Pair Trading with VanEck Brazil and IShares MSCI

The main advantage of trading using opposite VanEck Brazil and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Brazil 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 VanEck Brazil Small Cap and iShares MSCI Peru 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.