Correlation Between IShares IShares and Vanguard Index

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

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

Diversification Opportunities for IShares IShares and Vanguard Index

0.52

Correlation Coefficient

IShares IShares  Vanguard Index

Very weak diversification

The 3 months correlation between IShares and Vanguard is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares iShares and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and IShares IShares 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 iShares are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of IShares IShares i.e., IShares IShares and Vanguard Index go up and down completely randomly.

Pair Corralation between IShares IShares and Vanguard Index

Assuming the 90 days trading horizon iShares iShares is expected to under-perform the Vanguard Index. In addition to that, IShares IShares is 2.04 times more volatile than Vanguard Index Funds. It trades about -0.02 of its total potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.05 per unit of volatility. If you would invest  696,100  in Vanguard Index Funds on February 14, 2024 and sell it today you would earn a total of  108,385  from holding Vanguard Index Funds or generate 15.57% return on investment over 90 days.

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

iShares iShares  vs.  Vanguard Index Funds

iShares iShares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iShares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares IShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Index Funds

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Index Funds are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Vanguard Index is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares IShares and Vanguard Index

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

The idea behind iShares iShares and Vanguard Index Funds 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.