Correlation Between IShares MSCI and Vanguard Global

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

By analyzing existing cross correlation between iShares MSCI World and Vanguard Global Value, you can compare the effects of market volatilities on IShares MSCI and Vanguard Global 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 Vanguard Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard Global.

Diversification Opportunities for IShares MSCI and Vanguard Global

0.95

Correlation Coefficient

IShares MSCI  Vanguard Global

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and Vanguard Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Value 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 World are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Value has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard Global go up and down completely randomly.

Pair Corralation between IShares MSCI and Vanguard Global

Assuming the 90 days trading horizon IShares MSCI is expected to generate 1.04 times less return on investment than Vanguard Global. But when comparing it to its historical volatility, iShares MSCI World is 1.4 times less risky than Vanguard Global. It trades about 0.24 of its potential returns per unit of risk. Vanguard Global Value is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,983  in Vanguard Global Value on September 3, 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	100.0%
Values	Daily Returns

iShares MSCI World  vs.  Vanguard Global Value

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 January 2025.

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 January 2025.

Pair Trading with IShares MSCI and Vanguard Global

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

The idea behind iShares MSCI World and Vanguard Global Value 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.