Correlation Between IShares Telecommunicatio and Vanguard Health

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

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

Diversification Opportunities for IShares Telecommunicatio and Vanguard Health

0.95

Correlation Coefficient

IShares Telecommunicatio  Vanguard Health

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care and IShares Telecommunicatio 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 Telecommunications ETF are associated (or correlated) with Vanguard Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of IShares Telecommunicatio i.e., IShares Telecommunicatio and Vanguard Health go up and down completely randomly.

Pair Corralation between IShares Telecommunicatio and Vanguard Health

Considering the 90-day investment horizon iShares Telecommunications ETF is expected to under-perform the Vanguard Health. In addition to that, IShares Telecommunicatio is 1.22 times more volatile than Vanguard Health Care. It trades about -0.02 of its total potential returns per unit of risk. Vanguard Health Care is currently generating about -0.02 per unit of volatility. If you would invest  26,960  in Vanguard Health Care on February 23, 2024 and sell it today you would lose (221.00) from holding Vanguard Health Care or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

iShares Telecommunications ETF  vs.  Vanguard Health Care

IShares Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Telecommunications ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Vanguard Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Telecommunicatio and Vanguard Health

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

The idea behind iShares Telecommunications ETF and Vanguard Health Care 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.