Correlation Between Vanguard Growth and IShares Factors

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

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

Diversification Opportunities for Vanguard Growth and IShares Factors

0.81

Correlation Coefficient

Vanguard Growth  IShares Factors

Very poor diversification

The 3 months correlation between Vanguard and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and iShares Factors Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Factors Growth and Vanguard Growth 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 Growth Index are associated (or correlated) with IShares Factors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Factors Growth has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and IShares Factors go up and down completely randomly.

Pair Corralation between Vanguard Growth and IShares Factors

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 1.0 times more return on investment than IShares Factors. However, Vanguard Growth Index is 1.0 times less risky than IShares Factors. It trades about 0.14 of its potential returns per unit of risk. iShares Factors Growth is currently generating about 0.14 per unit of risk. If you would invest  21,152  in Vanguard Growth Index on September 19, 2024 and sell it today you would earn a total of  21,541  from holding Vanguard Growth Index or generate 101.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.59%
Values	Daily Returns

Vanguard Growth Index  vs.  iShares Factors Growth

Vanguard Growth Index

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Factors Growth

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days iShares Factors Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly abnormal essential indicators, IShares Factors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Growth and IShares Factors

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

The idea behind Vanguard Growth Index and iShares Factors Growth 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.