Correlation Between VictoryShares International and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both VictoryShares International and IShares 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 VictoryShares International and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VictoryShares International Value and iShares MSCI EAFE, you can compare the effects of market volatilities on VictoryShares International and IShares 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 VictoryShares International with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares International and IShares MSCI.
Diversification Opportunities for VictoryShares International and IShares MSCI
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between VictoryShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares International Va and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and VictoryShares International 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 VictoryShares International Value are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of VictoryShares International i.e., VictoryShares International and IShares MSCI go up and down completely randomly.
Pair Corralation between VictoryShares International and IShares MSCI
Given the investment horizon of 90 days VictoryShares International Value is expected to under-perform the IShares MSCI. In addition to that, VictoryShares International is 1.14 times more volatile than iShares MSCI EAFE. It trades about -0.14 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.08 per unit of volatility. If you would invest 5,404 in iShares MSCI EAFE on January 24, 2024 and sell it today you would lose (62.00) from holding iShares MSCI EAFE or give up 1.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VictoryShares International Va vs. iShares MSCI EAFE
Performance |
| Timeline |
| VictoryShares International |
| iShares MSCI EAFE |
VictoryShares International and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VictoryShares International and IShares MSCI
The main advantage of trading using opposite VictoryShares International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares International position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind VictoryShares International Value and iShares MSCI EAFE 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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