Correlation Between IShares Technology and Vanguard Information

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

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

Diversification Opportunities for IShares Technology and Vanguard Information

1.0

Correlation Coefficient

IShares Technology  Vanguard Information

No risk reduction

The 3 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information and IShares Technology 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 Technology ETF are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of IShares Technology i.e., IShares Technology and Vanguard Information go up and down completely randomly.

Pair Corralation between IShares Technology and Vanguard Information

Considering the 90-day investment horizon IShares Technology is expected to generate 1.07 times less return on investment than Vanguard Information. But when comparing it to its historical volatility, iShares Technology ETF is 1.01 times less risky than Vanguard Information. It trades about 0.16 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  54,784  in Vanguard Information Technology on September 1, 2024 and sell it today you would earn a total of  7,441  from holding Vanguard Information Technology or generate 13.58% return on investment over 90 days.

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

iShares Technology ETF  vs.  Vanguard Information Technolog

iShares Technology ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Technology ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Vanguard Information

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Vanguard Information unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Technology and Vanguard Information

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

The idea behind iShares Technology ETF and Vanguard Information Technology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.