Correlation Between IShares Core and Vanguard MSCI

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

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

Diversification Opportunities for IShares Core and Vanguard MSCI

0.99

Correlation Coefficient

IShares Core  Vanguard MSCI

No risk reduction

The 3 months correlation between IShares and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Vanguard MSCI International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard MSCI Intern and IShares Core 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 Core MSCI are associated (or correlated) with Vanguard MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard MSCI Intern has no effect on the direction of IShares Core i.e., IShares Core and Vanguard MSCI go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard MSCI

Assuming the 90 days trading horizon iShares Core MSCI is expected to generate 1.09 times more return on investment than Vanguard MSCI. However, IShares Core is 1.09 times more volatile than Vanguard MSCI International. It trades about 0.1 of its potential returns per unit of risk. Vanguard MSCI International is currently generating about 0.1 per unit of risk. If you would invest  3,645  in iShares Core MSCI on September 4, 2024 and sell it today you would earn a total of  1,810  from holding iShares Core MSCI or generate 49.66% return on investment over 90 days.

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

iShares Core MSCI  vs.  Vanguard MSCI International

iShares Core MSCI

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard MSCI Intern

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard MSCI International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Vanguard MSCI

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

The idea behind iShares Core MSCI and Vanguard MSCI 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.