Correlation Between IShares MSCI and VanEck Vietnam

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

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

Diversification Opportunities for IShares MSCI and VanEck Vietnam

0.84

Correlation Coefficient

IShares MSCI  VanEck Vietnam

Very poor diversification

The 3 months correlation between IShares and VanEck is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Indonesia and VanEck Vietnam ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vietnam ETF and IShares MSCI 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 iShares MSCI Indonesia are associated (or correlated) with VanEck Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vietnam ETF has no effect on the direction of IShares MSCI i.e., IShares MSCI and VanEck Vietnam go up and down completely randomly.

Pair Corralation between IShares MSCI and VanEck Vietnam

Given the investment horizon of 90 days iShares MSCI Indonesia is expected to under-perform the VanEck Vietnam. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Indonesia is 1.28 times less risky than VanEck Vietnam. The etf trades about -0.02 of its potential returns per unit of risk. The VanEck Vietnam ETF is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,200  in VanEck Vietnam ETF on October 21, 2024 and sell it today you would lose (62.00) from holding VanEck Vietnam ETF or give up 5.17% of portfolio value over 90 days.

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

iShares MSCI Indonesia  vs.  VanEck Vietnam ETF

iShares MSCI Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

VanEck Vietnam ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Vietnam ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares MSCI and VanEck Vietnam

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

The idea behind iShares MSCI Indonesia and VanEck Vietnam ETF 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.