Correlation Between VanEck FTSE and VanEck MSCI

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

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

Diversification Opportunities for VanEck FTSE and VanEck MSCI

0.26

Correlation Coefficient

VanEck FTSE  VanEck MSCI

Modest diversification

The 3 months correlation between VanEck and VanEck is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding VanEck FTSE China 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 VanEck FTSE 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 FTSE China 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 VanEck FTSE i.e., VanEck FTSE and VanEck MSCI go up and down completely randomly.

Pair Corralation between VanEck FTSE and VanEck MSCI

Assuming the 90 days trading horizon VanEck FTSE China is expected to generate 3.5 times more return on investment than VanEck MSCI. However, VanEck FTSE is 3.5 times more volatile than VanEck MSCI Australian. It trades about 0.1 of its potential returns per unit of risk. VanEck MSCI Australian is currently generating about 0.2 per unit of risk. If you would invest  4,788  in VanEck FTSE China on September 4, 2024 and sell it today you would earn a total of  765.00  from holding VanEck FTSE China or generate 15.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

VanEck FTSE China  vs.  VanEck MSCI Australian

VanEck FTSE China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck FTSE China are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, VanEck FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck MSCI Australian

Risk-Adjusted Performance

15 of 100

OK

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 VanEck FTSE and VanEck MSCI

The main advantage of trading using opposite VanEck FTSE and VanEck MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck FTSE 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 VanEck FTSE China 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.