Correlation Between IShares MSCI and Vanguard Total

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Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Vanguard Total 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 Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares MSCI Global and Vanguard Total Stock, you can compare the effects of market volatilities on IShares MSCI and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard Total.

Diversification Opportunities for IShares MSCI and Vanguard Total

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between IShares and Vanguard is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI Global and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Global are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard Total go up and down completely randomly.

Pair Corralation between IShares MSCI and Vanguard Total

Considering the 90-day investment horizon IShares MSCI Global is expected to under-perform the Vanguard Total. But the etf apears to be less risky and, when comparing its historical volatility, IShares MSCI Global is 1.11 times less risky than Vanguard Total. The etf trades about 0.0 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  20,206  in Vanguard Total Stock on December 29, 2023 and sell it today you would earn a total of  5,767  from holding Vanguard Total Stock or generate 28.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.78%
ValuesDaily Returns

IShares MSCI Global  vs.  Vanguard Total Stock

 Performance 
       Timeline  
IShares MSCI Global 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days IShares MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Vanguard Total Stock 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in April 2024.

IShares MSCI and Vanguard Total Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and Vanguard Total

The main advantage of trading using opposite IShares MSCI and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.
The idea behind IShares MSCI Global and Vanguard Total Stock 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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