Correlation Between Vanguard Russell and IShares MSCI

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

By analyzing existing cross correlation between Vanguard Russell 1000 and iShares MSCI USA, you can compare the effects of market volatilities on Vanguard Russell 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 Vanguard Russell with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and IShares MSCI.

Diversification Opportunities for Vanguard Russell and IShares MSCI

0.81

Correlation Coefficient

Vanguard Russell  IShares MSCI

Very poor diversification

The 3 months correlation between Vanguard and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA and Vanguard Russell 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 Russell 1000 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 USA has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and IShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard Russell and IShares MSCI

Assuming the 90 days horizon Vanguard Russell 1000 is expected to under-perform the IShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Russell 1000 is 1.05 times less risky than IShares MSCI. The etf trades about -0.12 of its potential returns per unit of risk. The iShares MSCI USA is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  20,735  in iShares MSCI USA on December 30, 2024 and sell it today you would lose (649.00) from holding iShares MSCI USA or give up 3.13% of portfolio value over 90 days.

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

Vanguard Russell 1000  vs.  iShares MSCI USA

Vanguard Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

iShares MSCI USA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard Russell and IShares MSCI

The main advantage of trading using opposite Vanguard Russell and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Russell 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 Vanguard Russell 1000 and iShares MSCI USA 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.