Correlation Between Vanguard USD and IShares Global

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

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

Diversification Opportunities for Vanguard USD and IShares Global

-0.7

Correlation Coefficient

Vanguard USD  IShares Global

Excellent diversification

The 3 months correlation between Vanguard and IShares is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard USD Emerging and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber and Vanguard USD 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 USD Emerging are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Timber has no effect on the direction of Vanguard USD i.e., Vanguard USD and IShares Global go up and down completely randomly.

Pair Corralation between Vanguard USD and IShares Global

Assuming the 90 days trading horizon Vanguard USD Emerging is expected to generate 0.23 times more return on investment than IShares Global. However, Vanguard USD Emerging is 4.34 times less risky than IShares Global. It trades about 0.03 of its potential returns per unit of risk. iShares Global Timber is currently generating about -0.3 per unit of risk. If you would invest  5,028  in Vanguard USD Emerging on September 27, 2024 and sell it today you would earn a total of  6.00  from holding Vanguard USD Emerging or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Vanguard USD Emerging  vs.  iShares Global Timber

Vanguard USD Emerging

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Emerging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard USD is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with Vanguard USD and IShares Global

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

The idea behind Vanguard USD Emerging and iShares Global Timber 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.