Correlation Between VanEck Morningstar and IShares MSCI

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

Diversification Opportunities for VanEck Morningstar and IShares MSCI

0.96

Correlation Coefficient

VanEck Morningstar  IShares MSCI

Almost no diversification

The 3 months correlation between VanEck and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Morningstar Internation and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and VanEck Morningstar 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 Morningstar International 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 EAFE has no effect on the direction of VanEck Morningstar i.e., VanEck Morningstar and IShares MSCI go up and down completely randomly.

Pair Corralation between VanEck Morningstar and IShares MSCI

Given the investment horizon of 90 days VanEck Morningstar is expected to generate 1.14 times less return on investment than IShares MSCI. In addition to that, VanEck Morningstar is 1.29 times more volatile than iShares MSCI EAFE. It trades about 0.18 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.27 per unit of volatility. If you would invest  5,239  in iShares MSCI EAFE on December 28, 2024 and sell it today you would earn a total of  743.00  from holding iShares MSCI EAFE or generate 14.18% return on investment over 90 days.

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

VanEck Morningstar Internation  vs.  iShares MSCI EAFE

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 14 (%) 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.

iShares MSCI EAFE

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, IShares MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VanEck Morningstar and IShares MSCI

The main advantage of trading using opposite VanEck Morningstar and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Morningstar 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 Morningstar International and iShares MSCI EAFE 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.