Correlation Between IShares Edge and Vident International

Can any of the company-specific risk be diversified away by investing in both IShares Edge and Vident International 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 Vident International 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 Vident International Equity, you can compare the effects of market volatilities on IShares Edge and Vident International 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 Vident International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and Vident International.

Diversification Opportunities for IShares Edge and Vident International

0.62

Correlation Coefficient

IShares Edge  Vident International

Poor diversification

The 3 months correlation between IShares and Vident is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and Vident International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident International 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 Vident International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident International has no effect on the direction of IShares Edge i.e., IShares Edge and Vident International go up and down completely randomly.

Pair Corralation between IShares Edge and Vident International

Given the investment horizon of 90 days iShares Edge MSCI is expected to generate 0.97 times more return on investment than Vident International. However, iShares Edge MSCI is 1.03 times less risky than Vident International. It trades about 0.07 of its potential returns per unit of risk. Vident International Equity is currently generating about 0.06 per unit of risk. If you would invest  2,171  in iShares Edge MSCI on September 14, 2024 and sell it today you would earn a total of  639.50  from holding iShares Edge MSCI or generate 29.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

iShares Edge MSCI  vs.  Vident International Equity

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, IShares Edge is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Vident International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vident International Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Vident International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Edge and Vident International

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

The idea behind iShares Edge MSCI and Vident International Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.