Correlation Between IShares MSCI and VanEck ETF

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

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

Diversification Opportunities for IShares MSCI and VanEck ETF

0.83

Correlation Coefficient

IShares MSCI  VanEck ETF

Very poor diversification

The 3 months correlation between IShares and VanEck is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI World and VanEck ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck ETF Trust 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 World are associated (or correlated) with VanEck ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck ETF Trust has no effect on the direction of IShares MSCI i.e., IShares MSCI and VanEck ETF go up and down completely randomly.

Pair Corralation between IShares MSCI and VanEck ETF

Given the investment horizon of 90 days iShares MSCI World is expected to generate 0.93 times more return on investment than VanEck ETF. However, iShares MSCI World is 1.08 times less risky than VanEck ETF. It trades about -0.02 of its potential returns per unit of risk. VanEck ETF Trust is currently generating about -0.09 per unit of risk. If you would invest  14,154  in iShares MSCI World on January 31, 2024 and sell it today you would lose (74.00) from holding iShares MSCI World or give up 0.52% of portfolio value over 90 days.

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

iShares MSCI World  vs.  VanEck ETF Trust

iShares MSCI World

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI World are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

VanEck ETF Trust

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, VanEck ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and VanEck ETF

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

The idea behind iShares MSCI World and VanEck ETF Trust 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.