Correlation Between IShares Core and Vanguard EUR

Can any of the company-specific risk be diversified away by investing in both IShares Core and Vanguard EUR 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 Vanguard EUR 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 Vanguard EUR Eurozone, you can compare the effects of market volatilities on IShares Core and Vanguard EUR 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 Vanguard EUR. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard EUR.

Diversification Opportunities for IShares Core and Vanguard EUR

0.09

Correlation Coefficient

IShares Core  Vanguard EUR

Significant diversification

The 3 months correlation between IShares and Vanguard is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Vanguard EUR Eurozone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard EUR Eurozone 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 Vanguard EUR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard EUR Eurozone has no effect on the direction of IShares Core i.e., IShares Core and Vanguard EUR go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard EUR

Assuming the 90 days trading horizon iShares Core MSCI is expected to under-perform the Vanguard EUR. In addition to that, IShares Core is 1.92 times more volatile than Vanguard EUR Eurozone. It trades about -0.18 of its total potential returns per unit of risk. Vanguard EUR Eurozone is currently generating about -0.17 per unit of volatility. If you would invest  2,145  in Vanguard EUR Eurozone on October 7, 2024 and sell it today you would lose (26.00) from holding Vanguard EUR Eurozone or give up 1.21% of portfolio value over 90 days.

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

iShares Core MSCI  vs.  Vanguard EUR Eurozone

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.

Vanguard EUR Eurozone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard EUR Eurozone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard EUR is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Core and Vanguard EUR

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

The idea behind iShares Core MSCI and Vanguard EUR Eurozone 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.