Correlation Between Vanguard FTSE and IShares Russell

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

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

Diversification Opportunities for Vanguard FTSE and IShares Russell

-0.62

Correlation Coefficient

Vanguard FTSE  IShares Russell

Excellent diversification

The 3 months correlation between Vanguard and IShares is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares Russell Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Top and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Top has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Russell go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares Russell

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the IShares Russell. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.14 times less risky than IShares Russell. The etf trades about -0.16 of its potential returns per unit of risk. The iShares Russell Top is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,547  in iShares Russell Top on September 23, 2024 and sell it today you would earn a total of  53.00  from holding iShares Russell Top or generate 0.36% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  iShares Russell Top

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

iShares Russell Top

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Top are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, IShares Russell is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard FTSE and IShares Russell

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

The idea behind Vanguard FTSE Developed and iShares Russell Top 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.