Correlation Between Vanguard Mid and IShares Core

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

Diversification Opportunities for Vanguard Mid and IShares Core

0.95

Correlation Coefficient

Vanguard Mid  IShares Core

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index 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 Mid 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 Mid Cap Index 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 Mid i.e., Vanguard Mid and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Mid and IShares Core

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 0.94 times more return on investment than IShares Core. However, Vanguard Mid Cap Index is 1.06 times less risky than IShares Core. It trades about -0.02 of its potential returns per unit of risk. iShares Core SP is currently generating about -0.05 per unit of risk. If you would invest  26,416  in Vanguard Mid Cap Index on December 28, 2024 and sell it today you would lose (323.00) from holding Vanguard Mid Cap Index or give up 1.22% of portfolio value over 90 days.

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

Vanguard Mid Cap Index  vs.  iShares Core SP

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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 fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard Mid and IShares Core

The main advantage of trading using opposite Vanguard Mid and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Mid Cap Index 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.