Correlation Between IShares Edge and Vanguard International

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

Diversification Opportunities for IShares Edge and Vanguard International

0.95

Correlation Coefficient

IShares Edge  Vanguard International

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and Vanguard International High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 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 Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of IShares Edge i.e., IShares Edge and Vanguard International go up and down completely randomly.

Pair Corralation between IShares Edge and Vanguard International

Given the investment horizon of 90 days iShares Edge MSCI is expected to under-perform the Vanguard International. But the etf apears to be less risky and, when comparing its historical volatility, iShares Edge MSCI is 1.01 times less risky than Vanguard International. The etf trades about -0.02 of its potential returns per unit of risk. The Vanguard International High is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,090  in Vanguard International High on September 12, 2024 and sell it today you would lose (10.00) from holding Vanguard International High or give up 0.14% of portfolio value over 90 days.

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

iShares Edge MSCI  vs.  Vanguard International High

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.

Vanguard International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vanguard International High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Vanguard International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Edge and Vanguard International

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

The idea behind iShares Edge MSCI and Vanguard International High 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.