Correlation Between Vanguard Total and IShares Broad

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

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

Diversification Opportunities for Vanguard Total and IShares Broad

-0.61

Correlation Coefficient

Vanguard Total  IShares Broad

Excellent diversification

The 3 months correlation between Vanguard and IShares is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and iShares Broad USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Broad USD and Vanguard Total 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 Total Stock are associated (or correlated) with IShares Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Broad USD has no effect on the direction of Vanguard Total i.e., Vanguard Total and IShares Broad go up and down completely randomly.

Pair Corralation between Vanguard Total and IShares Broad

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 1.94 times more return on investment than IShares Broad. However, Vanguard Total is 1.94 times more volatile than iShares Broad USD. It trades about 0.13 of its potential returns per unit of risk. iShares Broad USD is currently generating about 0.07 per unit of risk. If you would invest  20,908  in Vanguard Total Stock on August 31, 2024 and sell it today you would earn a total of  9,078  from holding Vanguard Total Stock or generate 43.42% return on investment over 90 days.

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

Vanguard Total Stock  vs.  iShares Broad USD

Vanguard Total Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares Broad USD

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Broad USD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, IShares Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Total and IShares Broad

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

The idea behind Vanguard Total Stock and iShares Broad USD 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..