Correlation Between Vanguard Consumer and IShares Basic

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

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

Diversification Opportunities for Vanguard Consumer and IShares Basic

-0.01

Correlation Coefficient

Vanguard Consumer  IShares Basic

Good diversification

The 3 months correlation between Vanguard and IShares is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Consumer Discretionar and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials and Vanguard Consumer 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 Consumer Discretionary are associated (or correlated) with IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of Vanguard Consumer i.e., Vanguard Consumer and IShares Basic go up and down completely randomly.

Pair Corralation between Vanguard Consumer and IShares Basic

Considering the 90-day investment horizon Vanguard Consumer Discretionary is expected to under-perform the IShares Basic. In addition to that, Vanguard Consumer is 1.52 times more volatile than iShares Basic Materials. It trades about -0.15 of its total potential returns per unit of risk. iShares Basic Materials is currently generating about 0.07 per unit of volatility. If you would invest  12,870  in iShares Basic Materials on December 28, 2024 and sell it today you would earn a total of  536.00  from holding iShares Basic Materials or generate 4.16% return on investment over 90 days.

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

Vanguard Consumer Discretionar  vs.  iShares Basic Materials

Vanguard Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Etf's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

iShares Basic Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Basic Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Basic is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Consumer and IShares Basic

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

The idea behind Vanguard Consumer Discretionary and iShares Basic Materials 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..