Correlation Between IShares Core and VanEck IBoxx

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

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

Diversification Opportunities for IShares Core and VanEck IBoxx

0.32

Correlation Coefficient

IShares Core  VanEck IBoxx

Weak diversification

The 3 months correlation between IShares and VanEck is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and VanEck iBoxx EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck iBoxx EUR and IShares Core 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 Core MSCI are associated (or correlated) with VanEck IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck iBoxx EUR has no effect on the direction of IShares Core i.e., IShares Core and VanEck IBoxx go up and down completely randomly.

Pair Corralation between IShares Core and VanEck IBoxx

Assuming the 90 days trading horizon iShares Core MSCI is expected to under-perform the VanEck IBoxx. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core MSCI is 2.65 times less risky than VanEck IBoxx. The etf trades about -0.12 of its potential returns per unit of risk. The VanEck iBoxx EUR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,240  in VanEck iBoxx EUR on October 9, 2024 and sell it today you would earn a total of  3.00  from holding VanEck iBoxx EUR or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

iShares Core MSCI  vs.  VanEck iBoxx EUR

iShares Core MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

VanEck iBoxx EUR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck iBoxx EUR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, VanEck IBoxx is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Core and VanEck IBoxx

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

The idea behind iShares Core MSCI and VanEck iBoxx EUR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.