Correlation Between IShares Edge and VanEck Morningstar

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

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

Diversification Opportunities for IShares Edge and VanEck Morningstar

0.95

Correlation Coefficient

IShares Edge  VanEck Morningstar

Almost no diversification

The 3 months correlation between IShares and VanEck is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and VanEck Morningstar Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar and IShares Edge 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 Edge MSCI 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 IShares Edge i.e., IShares Edge and VanEck Morningstar go up and down completely randomly.

Pair Corralation between IShares Edge and VanEck Morningstar

Given the investment horizon of 90 days iShares Edge MSCI is expected to generate 0.85 times more return on investment than VanEck Morningstar. However, iShares Edge MSCI is 1.17 times less risky than VanEck Morningstar. It trades about 0.24 of its potential returns per unit of risk. VanEck Morningstar International is currently generating about 0.16 per unit of risk. If you would invest  2,711  in iShares Edge MSCI on December 29, 2024 and sell it today you would earn a total of  381.00  from holding iShares Edge MSCI or generate 14.05% return on investment over 90 days.

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

iShares Edge MSCI  vs.  VanEck Morningstar Internation

iShares Edge MSCI

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Edge MSCI are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, IShares Edge unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck Morningstar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, VanEck Morningstar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares Edge and VanEck Morningstar

The main advantage of trading using opposite IShares Edge and VanEck Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge 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 iShares Edge MSCI 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.