Correlation Between IShares Global and Vanguard Ultra

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

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

Diversification Opportunities for IShares Global and Vanguard Ultra

0.91

Correlation Coefficient

IShares Global  Vanguard Ultra

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Consumer and Vanguard Ultra Short Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Ultra Short and IShares Global 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 Global Consumer are associated (or correlated) with Vanguard Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Ultra Short has no effect on the direction of IShares Global i.e., IShares Global and Vanguard Ultra go up and down completely randomly.

Pair Corralation between IShares Global and Vanguard Ultra

Considering the 90-day investment horizon iShares Global Consumer is expected to generate 19.59 times more return on investment than Vanguard Ultra. However, IShares Global is 19.59 times more volatile than Vanguard Ultra Short Bond. It trades about 0.08 of its potential returns per unit of risk. Vanguard Ultra Short Bond is currently generating about 0.43 per unit of risk. If you would invest  15,532  in iShares Global Consumer on September 27, 2024 and sell it today you would earn a total of  3,369  from holding iShares Global Consumer or generate 21.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

iShares Global Consumer  vs.  Vanguard Ultra Short Bond

iShares Global Consumer

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Ultra Short

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Ultra Short Bond are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Vanguard Ultra is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and Vanguard Ultra

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

The idea behind iShares Global Consumer and Vanguard Ultra Short Bond 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.