Correlation Between IShares Trust and Vanguard Mega

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

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

Diversification Opportunities for IShares Trust and Vanguard Mega

0.94

Correlation Coefficient

IShares Trust  Vanguard Mega

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Vanguard Mega Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mega Cap and IShares Trust 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 Trust are associated (or correlated) with Vanguard Mega. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mega Cap has no effect on the direction of IShares Trust i.e., IShares Trust and Vanguard Mega go up and down completely randomly.

Pair Corralation between IShares Trust and Vanguard Mega

Given the investment horizon of 90 days iShares Trust is expected to under-perform the Vanguard Mega. In addition to that, IShares Trust is 1.08 times more volatile than Vanguard Mega Cap. It trades about -0.13 of its total potential returns per unit of risk. Vanguard Mega Cap is currently generating about -0.09 per unit of volatility. If you would invest  34,634  in Vanguard Mega Cap on December 29, 2024 and sell it today you would lose (2,937) from holding Vanguard Mega Cap or give up 8.48% of portfolio value over 90 days.

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

iShares Trust   vs.  Vanguard Mega Cap

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Vanguard Mega Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mega Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with IShares Trust and Vanguard Mega

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

The idea behind iShares Trust and Vanguard Mega Cap 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.