Correlation Between IShares Trust and Vanguard International

Can any of the company-specific risk be diversified away by investing in both IShares Trust and Vanguard International 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 International 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 International Equity, you can compare the effects of market volatilities on IShares Trust and Vanguard International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Vanguard International.

Diversification Opportunities for IShares Trust and Vanguard International

0.0

Correlation Coefficient

IShares Trust  Vanguard International

Pay attention - limited upside

The 3 months correlation between IShares and Vanguard is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Vanguard International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of IShares Trust i.e., IShares Trust and Vanguard International go up and down completely randomly.

Pair Corralation between IShares Trust and Vanguard International

If you would invest  87,440  in Vanguard International Equity on September 4, 2024 and sell it today you would earn a total of  5,860  from holding Vanguard International Equity or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

iShares Trust   vs.  Vanguard International Equity

iShares Trust

Risk-Adjusted Performance

0 of 100

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 fairly strong forward-looking indicators, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard International

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with IShares Trust and Vanguard International

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

The idea behind iShares Trust and Vanguard International Equity 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.

Check out your portfolio center.

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.