Correlation Between Vanguard and Xtrackers MSCI

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

By analyzing existing cross correlation between Vanguard SP 500 and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on Vanguard and Xtrackers 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 with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Xtrackers MSCI.

Diversification Opportunities for Vanguard and Xtrackers MSCI

0.36

Correlation Coefficient

Vanguard  Xtrackers MSCI

Weak diversification

The 3 months correlation between Vanguard and Xtrackers is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE and Vanguard 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 SP 500 are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of Vanguard i.e., Vanguard and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Vanguard and Xtrackers MSCI

If you would invest  2,382  in Xtrackers MSCI EAFE on March 18, 2024 and sell it today you would earn a total of  0.00  from holding Xtrackers MSCI EAFE or generate 0.0% return on investment over 90 days.

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

Vanguard SP 500  vs.  Xtrackers MSCI EAFE

Vanguard SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard and Xtrackers MSCI

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

The idea behind Vanguard SP 500 and Xtrackers 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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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.