Correlation Between Vanguard Small and IShares International
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and IShares International 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 Small and IShares International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and iShares International Developed, you can compare the effects of market volatilities on Vanguard Small and IShares International 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 Small with a short position of IShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and IShares International.
Diversification Opportunities for Vanguard Small and IShares International
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and iShares International Develope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and Vanguard Small 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 Small Cap Index are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of Vanguard Small i.e., Vanguard Small and IShares International go up and down completely randomly.
Pair Corralation between Vanguard Small and IShares International
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to under-perform the IShares International. In addition to that, Vanguard Small is 1.4 times more volatile than iShares International Developed. It trades about -0.28 of its total potential returns per unit of risk. iShares International Developed is currently generating about 0.05 per unit of volatility. If you would invest 1,963 in iShares International Developed on December 3, 2024 and sell it today you would earn a total of 15.00 from holding iShares International Developed or generate 0.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Vanguard Small Cap Index vs. iShares International Develope
Performance |
Timeline |
Vanguard Small Cap |
iShares International |
Vanguard Small and IShares International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Small and IShares International
The main advantage of trading using opposite Vanguard Small and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, IShares International 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 International will offset losses from the drop in IShares International's long position.Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
IShares International vs. iShares International Treasury | IShares International vs. iShares 1 3 Year | IShares International vs. SPDR Dow Jones | IShares International vs. iShares MSCI Emerging |
Check out your portfolio center.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.
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