Correlation Between IShares Core and Vanguard Australian

Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core SP and Vanguard Australian Property, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of Vanguard Australian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard Australian.

Diversification Opportunities for IShares Core and Vanguard Australian

0.92

Correlation Coefficient

IShares Core  Vanguard Australian

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Vanguard Australian Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Australian 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 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 has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Australian go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard Australian

Assuming the 90 days trading horizon iShares Core SP is expected to generate 0.59 times more return on investment than Vanguard Australian. However, iShares Core SP is 1.71 times less risky than Vanguard Australian. It trades about -0.12 of its potential returns per unit of risk. Vanguard Australian Property is currently generating about -0.07 per unit of risk. If you would invest  6,361  in iShares Core SP on December 30, 2024 and sell it today you would lose (331.00) from holding iShares Core SP or give up 5.2% of portfolio value over 90 days.

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

iShares Core SP  vs.  Vanguard Australian Property

iShares Core SP

Risk-Adjusted Performance

Very Weak

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

Vanguard Australian

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Australian Property has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic 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 Core and Vanguard Australian

The main advantage of trading using opposite IShares Core and Vanguard Australian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and Vanguard Australian Property 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.