Correlation Between Vanguard and IShares SP

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

Diversification Opportunities for Vanguard and IShares SP

1.0

Correlation Coefficient

Vanguard  IShares SP

No risk reduction

The 3 months correlation between Vanguard and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP Small Cap and iShares SP Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP Small and Vanguard 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 SP Small Cap 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 Small has no effect on the direction of Vanguard i.e., Vanguard and IShares SP go up and down completely randomly.

Pair Corralation between Vanguard and IShares SP

Given the investment horizon of 90 days Vanguard SP Small Cap is expected to generate 0.99 times more return on investment than IShares SP. However, Vanguard SP Small Cap is 1.01 times less risky than IShares SP. It trades about -0.11 of its potential returns per unit of risk. iShares SP Small Cap is currently generating about -0.11 per unit of risk. If you would invest  11,724  in Vanguard SP Small Cap on December 21, 2024 and sell it today you would lose (905.00) from holding Vanguard SP Small Cap or give up 7.72% of portfolio value over 90 days.

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

Vanguard SP Small Cap  vs.  iShares SP Small Cap

Vanguard SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

iShares SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's forward-looking indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Vanguard and IShares SP

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

Check out your portfolio center.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.