Correlation Between Vanguard Value and IShares Global

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

Diversification Opportunities for Vanguard Value and IShares Global

0.62

Correlation Coefficient

Vanguard Value  IShares Global

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and iShares Global Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Healthcare 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Healthcare has no effect on the direction of Vanguard Value i.e., Vanguard Value and IShares Global go up and down completely randomly.

Pair Corralation between Vanguard Value and IShares Global

Considering the 90-day investment horizon Vanguard Value is expected to generate 3.13 times less return on investment than IShares Global. But when comparing it to its historical volatility, Vanguard Value Index is 1.0 times less risky than IShares Global. It trades about 0.04 of its potential returns per unit of risk. iShares Global Healthcare is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,576  in iShares Global Healthcare on December 29, 2024 and sell it today you would earn a total of  502.00  from holding iShares Global Healthcare or generate 5.85% return on investment over 90 days.

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

Vanguard Value Index  vs.  iShares Global Healthcare

Vanguard Value Index

Risk-Adjusted Performance

Insignificant

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

iShares Global Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Healthcare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares Global is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Vanguard Value and IShares Global

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

The idea behind Vanguard Value Index and iShares Global Healthcare 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.