Correlation Between IShares MSCI and VanEck Agribusiness

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

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

Diversification Opportunities for IShares MSCI and VanEck Agribusiness

0.74

Correlation Coefficient

IShares MSCI  VanEck Agribusiness

Poor diversification

The 3 months correlation between IShares and VanEck is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and VanEck Agribusiness ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Agribusiness ETF and IShares MSCI 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 MSCI Global are associated (or correlated) with VanEck Agribusiness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Agribusiness ETF has no effect on the direction of IShares MSCI i.e., IShares MSCI and VanEck Agribusiness go up and down completely randomly.

Pair Corralation between IShares MSCI and VanEck Agribusiness

Given the investment horizon of 90 days iShares MSCI Global is expected to generate 1.99 times more return on investment than VanEck Agribusiness. However, IShares MSCI is 1.99 times more volatile than VanEck Agribusiness ETF. It trades about -0.01 of its potential returns per unit of risk. VanEck Agribusiness ETF is currently generating about -0.05 per unit of risk. If you would invest  3,858  in iShares MSCI Global on September 16, 2024 and sell it today you would lose (58.00) from holding iShares MSCI Global or give up 1.5% of portfolio value over 90 days.

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

iShares MSCI Global  vs.  VanEck Agribusiness ETF

iShares MSCI Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

VanEck Agribusiness ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Agribusiness ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VanEck Agribusiness is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and VanEck Agribusiness

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

The idea behind iShares MSCI Global and VanEck Agribusiness ETF 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.