Correlation Between VanEck Gold and IShares MSCI

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

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

Diversification Opportunities for VanEck Gold and IShares MSCI

0.92

Correlation Coefficient

VanEck Gold  IShares MSCI

Almost no diversification

The 3 months correlation between VanEck and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Gold Miners and iShares MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Global and VanEck Gold 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 VanEck Gold Miners are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Global has no effect on the direction of VanEck Gold i.e., VanEck Gold and IShares MSCI go up and down completely randomly.

Pair Corralation between VanEck Gold and IShares MSCI

Considering the 90-day investment horizon VanEck Gold Miners is expected to generate 0.96 times more return on investment than IShares MSCI. However, VanEck Gold Miners is 1.04 times less risky than IShares MSCI. It trades about -0.1 of its potential returns per unit of risk. iShares MSCI Global is currently generating about -0.13 per unit of risk. If you would invest  3,990  in VanEck Gold Miners on September 5, 2024 and sell it today you would lose (220.00) from holding VanEck Gold Miners or give up 5.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

VanEck Gold Miners  vs.  iShares MSCI Global

VanEck Gold Miners

Risk-Adjusted Performance

1 of 100

Weak

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

iShares MSCI Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VanEck Gold and IShares MSCI

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

The idea behind VanEck Gold Miners and iShares MSCI Global 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.