Correlation Between IShares Global and Vanguard STAR
Can any of the company-specific risk be diversified away by investing in both IShares Global and Vanguard STAR 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 Global and Vanguard STAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Timber and Vanguard STAR Funds, you can compare the effects of market volatilities on IShares Global and Vanguard STAR 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 Global with a short position of Vanguard STAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Vanguard STAR.
Diversification Opportunities for IShares Global and Vanguard STAR
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Timber and Vanguard STAR Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard STAR Funds and IShares Global 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 Global Timber are associated (or correlated) with Vanguard STAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard STAR Funds has no effect on the direction of IShares Global i.e., IShares Global and Vanguard STAR go up and down completely randomly.
Pair Corralation between IShares Global and Vanguard STAR
Assuming the 90 days trading horizon IShares Global is expected to generate 7.12 times less return on investment than Vanguard STAR. But when comparing it to its historical volatility, iShares Global Timber is 6.8 times less risky than Vanguard STAR. It trades about 0.15 of its potential returns per unit of risk. Vanguard STAR Funds is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 101,355 in Vanguard STAR Funds on March 31, 2024 and sell it today you would earn a total of 9,524 from holding Vanguard STAR Funds or generate 9.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Global Timber vs. Vanguard STAR Funds
Performance |
Timeline |
iShares Global Timber |
Vanguard STAR Funds |
IShares Global and Vanguard STAR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Global and Vanguard STAR
The main advantage of trading using opposite IShares Global and Vanguard STAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, Vanguard STAR 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 STAR will offset losses from the drop in Vanguard STAR's long position.IShares Global vs. SPDR Series Trust | IShares Global vs. Vanguard Specialized Funds | IShares Global vs. ProShares Trust | IShares Global vs. iShares Trust |
Vanguard STAR vs. Vanguard Index Funds | Vanguard STAR vs. SPDR SP 500 | Vanguard STAR vs. Vanguard Tax Managed Funds | Vanguard STAR vs. Vanguard International Equity |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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