Correlation Between Vanguard Dividend and IShares ESG

Can any of the company-specific risk be diversified away by investing in both Vanguard Dividend 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 Dividend 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 Dividend Appreciation and iShares ESG Aware, you can compare the effects of market volatilities on Vanguard Dividend 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 Dividend with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Dividend and IShares ESG.

Diversification Opportunities for Vanguard Dividend and IShares ESG

0.78

Correlation Coefficient

Vanguard Dividend  IShares ESG

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 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 Aware has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and IShares ESG go up and down completely randomly.

Pair Corralation between Vanguard Dividend and IShares ESG

Considering the 90-day investment horizon Vanguard Dividend Appreciation is expected to generate 0.78 times more return on investment than IShares ESG. However, Vanguard Dividend Appreciation is 1.28 times less risky than IShares ESG. It trades about 0.0 of its potential returns per unit of risk. iShares ESG Aware is currently generating about -0.03 per unit of risk. If you would invest  20,351  in Vanguard Dividend Appreciation on December 2, 2024 and sell it today you would lose (38.00) from holding Vanguard Dividend Appreciation or give up 0.19% of portfolio value over 90 days.

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

Vanguard Dividend Appreciation  vs.  iShares ESG Aware

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. Despite nearly stable forward indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares ESG Aware

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Aware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Dividend and IShares ESG

The main advantage of trading using opposite Vanguard Dividend and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Dividend 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 Dividend Appreciation and iShares ESG Aware 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.