Correlation Between IShares UBS and Vanguard Global

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

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

Diversification Opportunities for IShares UBS and Vanguard Global

0.95

Correlation Coefficient

IShares UBS  Vanguard Global

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares UBS Government and Vanguard Global Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Aggregate and IShares UBS 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 UBS Government are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Aggregate has no effect on the direction of IShares UBS i.e., IShares UBS and Vanguard Global go up and down completely randomly.

Pair Corralation between IShares UBS and Vanguard Global

Assuming the 90 days trading horizon iShares UBS Government is expected to under-perform the Vanguard Global. In addition to that, IShares UBS is 1.28 times more volatile than Vanguard Global Aggregate. It trades about -0.02 of its total potential returns per unit of risk. Vanguard Global Aggregate is currently generating about -0.01 per unit of volatility. If you would invest  4,246  in Vanguard Global Aggregate on September 5, 2024 and sell it today you would lose (5.00) from holding Vanguard Global Aggregate or give up 0.12% of portfolio value over 90 days.

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

iShares UBS Government  vs.  Vanguard Global Aggregate

iShares UBS Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares UBS Government has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IShares UBS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Global Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Global Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Global 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 UBS and Vanguard Global

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

The idea behind iShares UBS Government and Vanguard Global Aggregate 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.