Correlation Between IShares MSCI and VanEck Vietnam

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

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

Diversification Opportunities for IShares MSCI and VanEck Vietnam

0.48

Correlation Coefficient

IShares MSCI  VanEck Vietnam

Very weak diversification

The 3 months correlation between IShares and VanEck is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Germany and VanEck Vietnam ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vietnam ETF 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 Germany are associated (or correlated) with VanEck Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vietnam ETF has no effect on the direction of IShares MSCI i.e., IShares MSCI and VanEck Vietnam go up and down completely randomly.

Pair Corralation between IShares MSCI and VanEck Vietnam

Considering the 90-day investment horizon iShares MSCI Germany is expected to generate 0.56 times more return on investment than VanEck Vietnam. However, iShares MSCI Germany is 1.79 times less risky than VanEck Vietnam. It trades about -0.12 of its potential returns per unit of risk. VanEck Vietnam ETF is currently generating about -0.3 per unit of risk. If you would invest  3,173  in iShares MSCI Germany on January 29, 2024 and sell it today you would lose (77.00) from holding iShares MSCI Germany or give up 2.43% of portfolio value over 90 days.

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

iShares MSCI Germany  vs.  VanEck Vietnam ETF

iShares MSCI Germany

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Germany are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares MSCI is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Vietnam ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares MSCI and VanEck Vietnam

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

The idea behind iShares MSCI Germany and VanEck Vietnam ETF 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.