Correlation Between Xtrackers MSCI and VanEck Morningstar

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

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

Diversification Opportunities for Xtrackers MSCI and VanEck Morningstar

0.69

Correlation Coefficient

Xtrackers MSCI  VanEck Morningstar

Poor diversification

The 3 months correlation between Xtrackers and VanEck is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI EAFE and VanEck Morningstar Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar and Xtrackers 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 Xtrackers MSCI EAFE are associated (or correlated) with VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and VanEck Morningstar go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and VanEck Morningstar

Given the investment horizon of 90 days Xtrackers MSCI EAFE is expected to under-perform the VanEck Morningstar. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers MSCI EAFE is 1.75 times less risky than VanEck Morningstar. The etf trades about -0.06 of its potential returns per unit of risk. The VanEck Morningstar International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,229  in VanEck Morningstar International on September 2, 2024 and sell it today you would earn a total of  18.00  from holding VanEck Morningstar International or generate 0.56% return on investment over 90 days.

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

Xtrackers MSCI EAFE  vs.  VanEck Morningstar Internation

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

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

VanEck Morningstar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Xtrackers MSCI and VanEck Morningstar

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

The idea behind Xtrackers MSCI EAFE and VanEck Morningstar International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.