Correlation Between IShares Broad and Vanguard ESG

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

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

Diversification Opportunities for IShares Broad and Vanguard ESG

0.93

Correlation Coefficient

IShares Broad  Vanguard ESG

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD and Vanguard ESG Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Corporate and IShares Broad 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 Broad USD are associated (or correlated) with Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Corporate has no effect on the direction of IShares Broad i.e., IShares Broad and Vanguard ESG go up and down completely randomly.

Pair Corralation between IShares Broad and Vanguard ESG

Given the investment horizon of 90 days iShares Broad USD is expected to generate 0.99 times more return on investment than Vanguard ESG. However, iShares Broad USD is 1.01 times less risky than Vanguard ESG. It trades about 0.09 of its potential returns per unit of risk. Vanguard ESG Corporate is currently generating about 0.08 per unit of risk. If you would invest  4,537  in iShares Broad USD on October 5, 2024 and sell it today you would earn a total of  483.00  from holding iShares Broad USD or generate 10.65% return on investment over 90 days.

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

iShares Broad USD  vs.  Vanguard ESG Corporate

iShares Broad USD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Broad USD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, IShares Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard ESG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard ESG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Broad and Vanguard ESG

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

The idea behind iShares Broad USD and Vanguard ESG Corporate 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.