Correlation Between Vanguard FTSE and SPDR MSCI

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

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

Diversification Opportunities for Vanguard FTSE and SPDR MSCI

0.0

Correlation Coefficient

Vanguard FTSE  SPDR MSCI

Pay attention - limited upside

The 3 months correlation between Vanguard and SPDR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and SPDR MSCI World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI World and Vanguard FTSE 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 FTSE All World are associated (or correlated) with SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI World has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and SPDR MSCI go up and down completely randomly.

Pair Corralation between Vanguard FTSE and SPDR MSCI

If you would invest  10,154  in Vanguard FTSE All World on February 5, 2024 and sell it today you would earn a total of  1,554  from holding Vanguard FTSE All World or generate 15.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vanguard FTSE All World  vs.  SPDR MSCI World

Vanguard FTSE All

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard FTSE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR MSCI World

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days SPDR MSCI World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR MSCI 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 Vanguard FTSE and SPDR MSCI

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

The idea behind Vanguard FTSE All World and SPDR 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.