Correlation Between IShares MSCI and VanEck Indonesia

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

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

Diversification Opportunities for IShares MSCI and VanEck Indonesia

-0.29

Correlation Coefficient

IShares MSCI  VanEck Indonesia

Very good diversification

The 3 months correlation between IShares and VanEck is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI South and VanEck Indonesia Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Indonesia 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 South are associated (or correlated) with VanEck Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Indonesia Index has no effect on the direction of IShares MSCI i.e., IShares MSCI and VanEck Indonesia go up and down completely randomly.

Pair Corralation between IShares MSCI and VanEck Indonesia

Considering the 90-day investment horizon iShares MSCI South is expected to generate 1.23 times more return on investment than VanEck Indonesia. However, IShares MSCI is 1.23 times more volatile than VanEck Indonesia Index. It trades about 0.01 of its potential returns per unit of risk. VanEck Indonesia Index is currently generating about -0.04 per unit of risk. If you would invest  5,543  in iShares MSCI South on December 3, 2024 and sell it today you would lose (27.00) from holding iShares MSCI South or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

iShares MSCI South  vs.  VanEck Indonesia Index

iShares MSCI South

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI South are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

VanEck Indonesia Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Indonesia Index 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 fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with IShares MSCI and VanEck Indonesia

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

The idea behind iShares MSCI South and VanEck Indonesia 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..