Correlation Between Vanguard Global and IShares MSCI

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

Diversification Opportunities for Vanguard Global and IShares MSCI

0.95

Correlation Coefficient

Vanguard Global  IShares MSCI

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Value and iShares MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI World and Vanguard Global 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 Global Value 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 World has no effect on the direction of Vanguard Global i.e., Vanguard Global and IShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard Global and IShares MSCI

Assuming the 90 days trading horizon Vanguard Global Value is expected to generate 1.39 times more return on investment than IShares MSCI. However, Vanguard Global is 1.39 times more volatile than iShares MSCI World. It trades about 0.18 of its potential returns per unit of risk. iShares MSCI World is currently generating about 0.23 per unit of risk. If you would invest  4,983  in Vanguard Global Value on August 31, 2024 and sell it today you would earn a total of  494.00  from holding Vanguard Global Value or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Vanguard Global Value  vs.  iShares MSCI World

Vanguard Global Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Value are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Vanguard Global may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares MSCI World

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI World are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Global and IShares MSCI

The main advantage of trading using opposite Vanguard Global and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global 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 Global Value and iShares MSCI World 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 Anywhere module to track or share privately all of your investments from the convenience of any device.