Correlation Between Vanguard and IShares Trust

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

Diversification Opportunities for Vanguard and IShares Trust

-0.16

Correlation Coefficient

Vanguard  IShares Trust

Good diversification

The 3 months correlation between Vanguard and IShares is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Vanguard i.e., Vanguard and IShares Trust go up and down completely randomly.

Pair Corralation between Vanguard and IShares Trust

If you would invest  342,615  in iShares Trust on December 4, 2024 and sell it today you would earn a total of  0.00  from holding iShares Trust or generate 0.0% return on investment over 90 days.

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

Vanguard SP 500  vs.  iShares Trust

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 Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard and IShares Trust

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

The idea behind Vanguard SP 500 and iShares Trust 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.