Correlation Between IShares Dividend and Vanguard Total

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

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

Diversification Opportunities for IShares Dividend and Vanguard Total

-0.01

Correlation Coefficient

IShares Dividend  Vanguard Total

Good diversification

The 3 months correlation between IShares and Vanguard is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding iShares Dividend Growers and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market and IShares Dividend 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 Dividend Growers are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of IShares Dividend i.e., IShares Dividend and Vanguard Total go up and down completely randomly.

Pair Corralation between IShares Dividend and Vanguard Total

Assuming the 90 days trading horizon IShares Dividend is expected to generate 1.87 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, iShares Dividend Growers is 1.18 times less risky than Vanguard Total. It trades about 0.1 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,289  in Vanguard Total Market on September 24, 2024 and sell it today you would earn a total of  3,070  from holding Vanguard Total Market or generate 42.12% return on investment over 90 days.

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

iShares Dividend Growers  vs.  Vanguard Total Market

iShares Dividend Growers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Total Market

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Market are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Dividend and Vanguard Total

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

The idea behind iShares Dividend Growers and Vanguard Total Market 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.