Correlation Between Vanguard MSCI and BetaShares Managed

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

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

Diversification Opportunities for Vanguard MSCI and BetaShares Managed

0.91

Correlation Coefficient

Vanguard MSCI  BetaShares Managed

Almost no diversification

The 3 months correlation between Vanguard and BetaShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard MSCI International and BetaShares Managed Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Managed Risk and Vanguard 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 Vanguard MSCI International are associated (or correlated) with BetaShares Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Managed Risk has no effect on the direction of Vanguard MSCI i.e., Vanguard MSCI and BetaShares Managed go up and down completely randomly.

Pair Corralation between Vanguard MSCI and BetaShares Managed

Assuming the 90 days trading horizon Vanguard MSCI International is expected to generate 0.84 times more return on investment than BetaShares Managed. However, Vanguard MSCI International is 1.18 times less risky than BetaShares Managed. It trades about -0.03 of its potential returns per unit of risk. BetaShares Managed Risk is currently generating about -0.04 per unit of risk. If you would invest  10,616  in Vanguard MSCI International on December 30, 2024 and sell it today you would lose (219.00) from holding Vanguard MSCI International or give up 2.06% of portfolio value over 90 days.

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

Vanguard MSCI International  vs.  BetaShares Managed Risk

Vanguard MSCI Intern

Risk-Adjusted Performance

Very Weak

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

BetaShares Managed Risk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard MSCI and BetaShares Managed

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

The idea behind Vanguard MSCI International and BetaShares Managed Risk 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.