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Fundology

Methodology · reviewed

How a fund moves with a stand-in fund: correlation and beta

We compare a fund’s weekly returns with those of a large, well-known fund for its market — for example iShares Core MSCI World for global shares. Correlation says how closely they moved together; beta says how far the fund moved, on average, for each 1% move in the stand-in.

The formula

correlation = cov(fund, stand-in) ÷ (sd fund × sd stand-in) · beta = cov(fund, stand-in) ÷ var(stand-in)

Worked example

A beta of 1.4 means the fund tended to move about 1.4% for each 1% move in the stand-in.

How it is done

  1. Uses three years of weekly returns in pounds, pairing only weeks both records cover along with the week before; at least 70% of weeks must pair.

  2. Stand-ins: global — iShares Core MSCI World; UK — iShares Core FTSE 100 (Acc); US — iShares Core S&P 500; Europe — iShares Core MSCI Europe (Acc); emerging markets — iShares Core MSCI EM IMI; bonds — iShares Core UK Gilts; gold — Invesco Physical Gold. Funds in Japan and Asia Pacific, or with no single region, are compared with the global stand-in.

  3. The comparison always names the stand-in fund; it is not an index or an official benchmark.

  4. Not shown for leveraged, crypto or cash-like funds, or for commodities other than gold.

Limits to know about

  • Relationships between markets change over time.
  • The stand-in has its own charges and tracking differences.

Sources

  • Fundology closes
  • TradingView weekly history (used for derived figures only)
  • ECB reference rates via Frankfurter

Reviewed . If a figure on the site does not follow this method, tell us. This is information, not advice.