Correlation Between IShares MSCI and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Vanguard Growth 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 Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Vanguard Growth Index, you can compare the effects of market volatilities on IShares MSCI and Vanguard Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Vanguard Growth.
Diversification Opportunities for IShares MSCI and Vanguard Growth
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 EAFE are associated (or correlated) with Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of IShares MSCI i.e., IShares MSCI and Vanguard Growth go up and down completely randomly.
Pair Corralation between IShares MSCI and Vanguard Growth
Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 0.76 times more return on investment than Vanguard Growth. However, iShares MSCI EAFE is 1.32 times less risky than Vanguard Growth. It trades about -0.29 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about -0.35 per unit of risk. If you would invest 6,325 in iShares MSCI EAFE on January 21, 2024 and sell it today you would lose (279.00) from holding iShares MSCI EAFE or give up 4.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Vanguard Growth Index
Performance |
| Timeline |
| iShares MSCI EAFE |
| Vanguard Growth Index |
IShares MSCI and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Vanguard Growth
The main advantage of trading using opposite IShares MSCI and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Vanguard Growth 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 Growth will offset losses from the drop in Vanguard Growth's long position.| IShares MSCI vs. Northern Lights | IShares MSCI vs. Dimensional International High | IShares MSCI vs. Matthews China Discovery | IShares MSCI vs. Davis Select International |
| Vanguard Growth vs. Vanguard Value Index | Vanguard Growth vs. Vanguard Information Technology | Vanguard Growth vs. Vanguard Small Cap Growth | Vanguard Growth vs. Vanguard Dividend Appreciation |
Check out your portfolio center.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.
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