Correlation Between Xtrackers MSCI and Vanguard Funds

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

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

Diversification Opportunities for Xtrackers MSCI and Vanguard Funds

-0.86

Correlation Coefficient

Xtrackers MSCI  Vanguard Funds

Pay attention - limited upside

The 3 months correlation between Xtrackers and Vanguard is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Pakistan and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public and Xtrackers 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 Xtrackers MSCI Pakistan are associated (or correlated) with Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and Vanguard Funds go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and Vanguard Funds

Assuming the 90 days trading horizon Xtrackers MSCI Pakistan is expected to generate 4.35 times more return on investment than Vanguard Funds. However, Xtrackers MSCI is 4.35 times more volatile than Vanguard Funds Public. It trades about 0.26 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about -0.06 per unit of risk. If you would invest  87.00  in Xtrackers MSCI Pakistan on September 3, 2024 and sell it today you would earn a total of  23.00  from holding Xtrackers MSCI Pakistan or generate 26.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Xtrackers MSCI Pakistan  vs.  Vanguard Funds Public

Xtrackers MSCI Pakistan

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Pakistan are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Xtrackers MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Funds Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Xtrackers MSCI and Vanguard Funds

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

The idea behind Xtrackers MSCI Pakistan and Vanguard Funds Public 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.