Correlation Between Vanguard All and IShares ESG

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

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

Diversification Opportunities for Vanguard All and IShares ESG

0.97

Correlation Coefficient

Vanguard All  IShares ESG

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard All Equity ETF and iShares ESG Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Balanced and Vanguard All 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 All Equity ETF are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Balanced has no effect on the direction of Vanguard All i.e., Vanguard All and IShares ESG go up and down completely randomly.

Pair Corralation between Vanguard All and IShares ESG

Assuming the 90 days trading horizon Vanguard All Equity ETF is expected to generate 0.8 times more return on investment than IShares ESG. However, Vanguard All Equity ETF is 1.25 times less risky than IShares ESG. It trades about 0.32 of its potential returns per unit of risk. iShares ESG Balanced is currently generating about 0.18 per unit of risk. If you would invest  4,197  in Vanguard All Equity ETF on September 4, 2024 and sell it today you would earn a total of  470.00  from holding Vanguard All Equity ETF or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard All Equity ETF  vs.  iShares ESG Balanced

Vanguard All Equity

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard All Equity ETF are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard All may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares ESG Balanced

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Balanced are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard All and IShares ESG

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

The idea behind Vanguard All Equity ETF and iShares ESG Balanced 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.