Correlation Between VanEck Indonesia and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both VanEck Indonesia 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 Indonesia 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 Indonesia Index and iShares MSCI Thailand, you can compare the effects of market volatilities on VanEck Indonesia 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 Indonesia with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Indonesia and IShares MSCI.

Diversification Opportunities for VanEck Indonesia and IShares MSCI

0.79

Correlation Coefficient

VanEck Indonesia  IShares MSCI

Poor diversification

The 3 months correlation between VanEck and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Indonesia Index and iShares MSCI Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Thailand and VanEck Indonesia 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 Indonesia Index 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 Thailand has no effect on the direction of VanEck Indonesia i.e., VanEck Indonesia and IShares MSCI go up and down completely randomly.

Pair Corralation between VanEck Indonesia and IShares MSCI

Considering the 90-day investment horizon VanEck Indonesia Index is expected to under-perform the IShares MSCI. In addition to that, VanEck Indonesia is 1.13 times more volatile than iShares MSCI Thailand. It trades about -0.14 of its total potential returns per unit of risk. iShares MSCI Thailand is currently generating about -0.04 per unit of volatility. If you would invest  6,614  in iShares MSCI Thailand on September 13, 2024 and sell it today you would lose (210.00) from holding iShares MSCI Thailand or give up 3.18% of portfolio value over 90 days.

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

VanEck Indonesia Index  vs.  iShares MSCI Thailand

VanEck Indonesia Index

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Etf's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

iShares MSCI Thailand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Indonesia and IShares MSCI

The main advantage of trading using opposite VanEck Indonesia and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Indonesia 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 Indonesia Index and iShares MSCI Thailand 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 Transaction History module to view history of all your transactions and understand their impact on performance.