Correlation Between Vanguard Dividend and IShares SP

Can any of the company-specific risk be diversified away by investing in both Vanguard Dividend and IShares SP 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 SP 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 SP 100, you can compare the effects of market volatilities on Vanguard Dividend and IShares SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Dividend and IShares SP.

Diversification Opportunities for Vanguard Dividend and IShares SP

0.46

Correlation Coefficient

Vanguard Dividend  IShares SP

Very weak diversification

The 3 months correlation between Vanguard and IShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and iShares SP 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 100 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 100 has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and IShares SP go up and down completely randomly.

Pair Corralation between Vanguard Dividend and IShares SP

Considering the 90-day investment horizon Vanguard Dividend is expected to generate 1.44 times less return on investment than IShares SP. But when comparing it to its historical volatility, Vanguard Dividend Appreciation is 1.33 times less risky than IShares SP. It trades about 0.06 of its potential returns per unit of risk. iShares SP 100 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  26,343  in iShares SP 100 on October 13, 2024 and sell it today you would earn a total of  2,229  from holding iShares SP 100 or generate 8.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.31%
Values	Daily Returns

Vanguard Dividend Appreciation  vs.  iShares SP 100

Vanguard Dividend

Risk-Adjusted Performance

0 of 100

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 SP 100

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 100 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Dividend and IShares SP

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

The idea behind Vanguard Dividend Appreciation and iShares SP 100 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.