Correlation Between Vanguard and IShares IShares

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

By analyzing existing cross correlation between Vanguard SP 500 and iShares iShares, you can compare the effects of market volatilities on Vanguard and IShares IShares 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 IShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and IShares IShares.

Diversification Opportunities for Vanguard and IShares IShares

0.75

Correlation Coefficient

Vanguard  IShares IShares

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares iShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iShares 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 500 are associated (or correlated) with IShares IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iShares has no effect on the direction of Vanguard i.e., Vanguard and IShares IShares go up and down completely randomly.

Pair Corralation between Vanguard and IShares IShares

Assuming the 90 days trading horizon Vanguard SP 500 is expected to under-perform the IShares IShares. In addition to that, Vanguard is 1.27 times more volatile than iShares iShares. It trades about -0.07 of its total potential returns per unit of risk. iShares iShares is currently generating about 0.05 per unit of volatility. If you would invest  80,425  in iShares iShares on December 22, 2024 and sell it today you would earn a total of  1,778  from holding iShares iShares or generate 2.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Vanguard SP 500  vs.  iShares iShares

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

iShares iShares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iShares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares IShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard and IShares IShares

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

The idea behind Vanguard SP 500 and iShares iShares 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.