Correlation Between Vanguard Mega and IShares Core

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

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

Diversification Opportunities for Vanguard Mega and IShares Core

0.58

Correlation Coefficient

Vanguard Mega  IShares Core

Very weak diversification

The 3 months correlation between Vanguard and IShares is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and iShares Core Aggressive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggressive and Vanguard Mega 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 Vanguard Mega Cap are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Aggressive has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Mega and IShares Core

Considering the 90-day investment horizon Vanguard Mega Cap is expected to under-perform the IShares Core. In addition to that, Vanguard Mega is 1.51 times more volatile than iShares Core Aggressive. It trades about -0.09 of its total potential returns per unit of risk. iShares Core Aggressive is currently generating about 0.02 per unit of volatility. If you would invest  7,666  in iShares Core Aggressive on December 29, 2024 and sell it today you would earn a total of  67.00  from holding iShares Core Aggressive or generate 0.87% return on investment over 90 days.

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

Vanguard Mega Cap  vs.  iShares Core Aggressive

Vanguard Mega Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mega Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Vanguard Mega is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Core Aggressive

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Aggressive are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Mega and IShares Core

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

The idea behind Vanguard Mega Cap and iShares Core Aggressive 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.