Correlation Between IShares Asia and Vanguard Australian

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

By analyzing existing cross correlation between iShares Asia 50 and Vanguard Australian Fixed, you can compare the effects of market volatilities on IShares Asia and Vanguard Australian 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 Asia with a short position of Vanguard Australian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Asia and Vanguard Australian.

Diversification Opportunities for IShares Asia and Vanguard Australian

0.8

Correlation Coefficient

IShares Asia  Vanguard Australian

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia 50 and Vanguard Australian Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Australian Fixed and IShares Asia 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 Asia 50 are associated (or correlated) with Vanguard Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Australian Fixed has no effect on the direction of IShares Asia i.e., IShares Asia and Vanguard Australian go up and down completely randomly.

Pair Corralation between IShares Asia and Vanguard Australian

Assuming the 90 days trading horizon iShares Asia 50 is expected to generate 5.25 times more return on investment than Vanguard Australian. However, IShares Asia is 5.25 times more volatile than Vanguard Australian Fixed. It trades about 0.08 of its potential returns per unit of risk. Vanguard Australian Fixed is currently generating about 0.1 per unit of risk. If you would invest  11,028  in iShares Asia 50 on December 30, 2024 and sell it today you would earn a total of  622.00  from holding iShares Asia 50 or generate 5.64% return on investment over 90 days.

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

iShares Asia 50  vs.  Vanguard Australian Fixed

iShares Asia 50

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Asia 50 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Australian Fixed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Australian Fixed are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Vanguard Australian is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Asia and Vanguard Australian

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

The idea behind iShares Asia 50 and Vanguard Australian Fixed 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.