Correlation Between Vanguard High and IShares MSCI

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

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

Diversification Opportunities for Vanguard High and IShares MSCI

0.69

Correlation Coefficient

Vanguard High  IShares MSCI

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Dividend and iShares MSCI KLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI KLD and Vanguard High 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 High Dividend 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 KLD has no effect on the direction of Vanguard High i.e., Vanguard High and IShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard High and IShares MSCI

Considering the 90-day investment horizon Vanguard High Dividend is expected to under-perform the IShares MSCI. In addition to that, Vanguard High is 1.16 times more volatile than iShares MSCI KLD. It trades about -0.06 of its total potential returns per unit of risk. iShares MSCI KLD is currently generating about 0.3 per unit of volatility. If you would invest  10,111  in iShares MSCI KLD on March 21, 2024 and sell it today you would earn a total of  366.00  from holding iShares MSCI KLD or generate 3.62% return on investment over 90 days.

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

Vanguard High Dividend  vs.  iShares MSCI KLD

Vanguard High Dividend

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vanguard High Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard High is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

iShares MSCI KLD

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI KLD are ranked lower than 7 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard High and IShares MSCI

The main advantage of trading using opposite Vanguard High and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High 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 Vanguard High Dividend and iShares MSCI KLD 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.