Correlation Between IShares MSCI and VanEck Morningstar

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and VanEck Morningstar 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 Morningstar 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 VanEck Morningstar International, you can compare the effects of market volatilities on IShares MSCI and VanEck Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and VanEck Morningstar.

Diversification Opportunities for IShares MSCI and VanEck Morningstar

0.74

Correlation Coefficient

IShares MSCI  VanEck Morningstar

Poor diversification

The 3 months correlation between IShares and VanEck is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Global and VanEck Morningstar Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Morningstar 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 VanEck Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Morningstar has no effect on the direction of IShares MSCI i.e., IShares MSCI and VanEck Morningstar go up and down completely randomly.

Pair Corralation between IShares MSCI and VanEck Morningstar

Considering the 90-day investment horizon iShares MSCI Global is expected to under-perform the VanEck Morningstar. In addition to that, IShares MSCI is 1.0 times more volatile than VanEck Morningstar International. It trades about -0.11 of its total potential returns per unit of risk. VanEck Morningstar International is currently generating about 0.0 per unit of volatility. If you would invest  3,120  in VanEck Morningstar International on January 30, 2024 and sell it today you would lose (1.00) from holding VanEck Morningstar International or give up 0.03% of portfolio value over 90 days.

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

iShares MSCI Global  vs.  VanEck Morningstar Internation

iShares MSCI Global

Risk-Adjusted Performance

0 of 100

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Morningstar

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Morningstar International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck Morningstar is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares MSCI and VanEck Morningstar

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

The idea behind iShares MSCI Global and VanEck Morningstar International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.