Correlation Between IShares Core and Vanguard Scottsdale

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

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

Diversification Opportunities for IShares Core and Vanguard Scottsdale

0.78

Correlation Coefficient

IShares Core  Vanguard Scottsdale

Poor diversification

The 3 months correlation between IShares and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Vanguard Scottsdale Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Scottsdale Funds and IShares Core 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 Core SP are associated (or correlated) with Vanguard Scottsdale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Scottsdale Funds has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Scottsdale go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard Scottsdale

Assuming the 90 days trading horizon iShares Core SP is expected to generate 1.07 times more return on investment than Vanguard Scottsdale. However, IShares Core is 1.07 times more volatile than Vanguard Scottsdale Funds. It trades about 0.1 of its potential returns per unit of risk. Vanguard Scottsdale Funds is currently generating about 0.07 per unit of risk. If you would invest  167,355  in iShares Core SP on September 28, 2024 and sell it today you would earn a total of  65,945  from holding iShares Core SP or generate 39.4% return on investment over 90 days.

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

iShares Core SP  vs.  Vanguard Scottsdale Funds

iShares Core SP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Scottsdale Funds

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Scottsdale Funds are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard Scottsdale may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Core and Vanguard Scottsdale

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

The idea behind iShares Core SP and Vanguard Scottsdale Funds 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.