Correlation Between Vanguard Mega and IShares Trust

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

Diversification Opportunities for Vanguard Mega and IShares Trust

0.99

Correlation Coefficient

Vanguard Mega  IShares Trust

No risk reduction

The 3 months correlation between Vanguard and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and IShares Trust go up and down completely randomly.

Pair Corralation between Vanguard Mega and IShares Trust

Considering the 90-day investment horizon Vanguard Mega Cap is expected to under-perform the IShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Mega Cap is 1.04 times less risky than IShares Trust. The etf trades about -0.12 of its potential returns per unit of risk. The iShares Trust is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,623  in iShares Trust on December 26, 2024 and sell it today you would lose (439.00) from holding iShares Trust or give up 9.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Vanguard Mega Cap  vs.  iShares Trust

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. Despite latest abnormal performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

iShares Trust

Risk-Adjusted Performance

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 latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Vanguard Mega and IShares Trust

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

The idea behind Vanguard Mega Cap and iShares Trust 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.