Correlation Between Vanguard ESG and IShares Convertible

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

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

Diversification Opportunities for Vanguard ESG and IShares Convertible

-0.22

Correlation Coefficient

Vanguard ESG  IShares Convertible

Very good diversification

The 3 months correlation between Vanguard and IShares is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Corporate and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond and Vanguard ESG 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 ESG Corporate are associated (or correlated) with IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and IShares Convertible go up and down completely randomly.

Pair Corralation between Vanguard ESG and IShares Convertible

Given the investment horizon of 90 days Vanguard ESG Corporate is expected to generate 0.5 times more return on investment than IShares Convertible. However, Vanguard ESG Corporate is 2.02 times less risky than IShares Convertible. It trades about -0.24 of its potential returns per unit of risk. iShares Convertible Bond is currently generating about -0.3 per unit of risk. If you would invest  6,323  in Vanguard ESG Corporate on October 2, 2024 and sell it today you would lose (107.00) from holding Vanguard ESG Corporate or give up 1.69% of portfolio value over 90 days.

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

Vanguard ESG Corporate  vs.  iShares Convertible Bond

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 latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Convertible Bond

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Convertible Bond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares Convertible is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard ESG and IShares Convertible

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

The idea behind Vanguard ESG Corporate and iShares Convertible 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.