Correlation Between Vanguard Dividend and IShares Dividend

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

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

Diversification Opportunities for Vanguard Dividend and IShares Dividend

0.4

Correlation Coefficient

Vanguard Dividend  IShares Dividend

Very weak diversification

The 3 months correlation between Vanguard and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and iShares Dividend Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dividend Growers and Vanguard Dividend 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 Dividend Appreciation are associated (or correlated) with IShares Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dividend Growers has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and IShares Dividend go up and down completely randomly.

Pair Corralation between Vanguard Dividend and IShares Dividend

Assuming the 90 days trading horizon Vanguard Dividend Appreciation is expected to under-perform the IShares Dividend. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Dividend Appreciation is 1.03 times less risky than IShares Dividend. The etf trades about -0.04 of its potential returns per unit of risk. The iShares Dividend Growers is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,212  in iShares Dividend Growers on December 30, 2024 and sell it today you would earn a total of  110.00  from holding iShares Dividend Growers or generate 2.11% return on investment over 90 days.

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

Vanguard Dividend Appreciation  vs.  iShares Dividend Growers

Vanguard Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Dividend Appreciation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Dividend Growers

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Dividend Growers are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Dividend is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Dividend and IShares Dividend

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

The idea behind Vanguard Dividend Appreciation and iShares Dividend Growers 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.