Correlation Between Vanguard Value and IShares Dividend

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

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

Diversification Opportunities for Vanguard Value and IShares Dividend

0.99

Correlation Coefficient

Vanguard Value  IShares Dividend

No risk reduction

The 3 months correlation between Vanguard and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and iShares Dividend and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dividend and Vanguard Value 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 Value Index are associated (or correlated) with IShares Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dividend has no effect on the direction of Vanguard Value i.e., Vanguard Value and IShares Dividend go up and down completely randomly.

Pair Corralation between Vanguard Value and IShares Dividend

Considering the 90-day investment horizon Vanguard Value is expected to generate 1.15 times less return on investment than IShares Dividend. But when comparing it to its historical volatility, Vanguard Value Index is 1.05 times less risky than IShares Dividend. It trades about 0.17 of its potential returns per unit of risk. iShares Dividend and is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,715  in iShares Dividend and on September 1, 2024 and sell it today you would earn a total of  380.00  from holding iShares Dividend and or generate 8.06% return on investment over 90 days.

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

Vanguard Value Index  vs.  iShares Dividend and

Vanguard Value Index

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Vanguard Value may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares Dividend

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Dividend and are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, IShares Dividend may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vanguard Value and IShares Dividend

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

The idea behind Vanguard Value Index and iShares Dividend and 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.