Correlation Between Vanguard Real and IShares Core

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

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

Diversification Opportunities for Vanguard Real and IShares Core

0.54

Correlation Coefficient

Vanguard Real  IShares Core

Very weak diversification

The 3 months correlation between Vanguard and IShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and Vanguard Real 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 Real Estate are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Vanguard Real i.e., Vanguard Real and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Real and IShares Core

Considering the 90-day investment horizon Vanguard Real is expected to generate 1.21 times less return on investment than IShares Core. In addition to that, Vanguard Real is 1.2 times more volatile than iShares Core SP. It trades about 0.05 of its total potential returns per unit of risk. iShares Core SP is currently generating about 0.08 per unit of volatility. If you would invest  11,205  in iShares Core SP on December 2, 2024 and sell it today you would earn a total of  1,801  from holding iShares Core SP or generate 16.07% return on investment over 90 days.

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

Vanguard Real Estate  vs.  iShares Core SP

Vanguard Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Vanguard Real is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

iShares Core SP

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vanguard Real and IShares Core

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

The idea behind Vanguard Real Estate and iShares Core SP 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .