Correlation Between IShares MSCI and Vanguard Bond

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

By analyzing existing cross correlation between iShares MSCI Netherlands and Vanguard Bond Index, you can compare the effects of market volatilities on IShares MSCI and Vanguard Bond 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 Vanguard Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard Bond.

Diversification Opportunities for IShares MSCI and Vanguard Bond

-0.58

Correlation Coefficient

IShares MSCI  Vanguard Bond

Excellent diversification

The 3 months correlation between IShares and Vanguard is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Netherlands and Vanguard Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Bond Index 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 Netherlands are associated (or correlated) with Vanguard Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Bond Index has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard Bond go up and down completely randomly.

Pair Corralation between IShares MSCI and Vanguard Bond

If you would invest  145,529  in Vanguard Bond Index on October 24, 2024 and sell it today you would earn a total of  471.00  from holding Vanguard Bond Index or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares MSCI Netherlands  vs.  Vanguard Bond Index

iShares MSCI Netherlands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Netherlands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Bond Index

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Bond Index are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Vanguard Bond is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Vanguard Bond

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

The idea behind iShares MSCI Netherlands and Vanguard Bond Index 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.