Correlation Between Vanguard Funds and IShares STOXX

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

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

Diversification Opportunities for Vanguard Funds and IShares STOXX

-0.54

Correlation Coefficient

Vanguard Funds  IShares STOXX

Excellent diversification

The 3 months correlation between Vanguard and IShares is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe and Vanguard Funds 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 Funds Public are associated (or correlated) with IShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and IShares STOXX go up and down completely randomly.

Pair Corralation between Vanguard Funds and IShares STOXX

Assuming the 90 days trading horizon Vanguard Funds Public is expected to under-perform the IShares STOXX. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Funds Public is 1.21 times less risky than IShares STOXX. The etf trades about -0.1 of its potential returns per unit of risk. The iShares STOXX Europe is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  2,069  in iShares STOXX Europe on December 30, 2024 and sell it today you would earn a total of  592.00  from holding iShares STOXX Europe or generate 28.61% return on investment over 90 days.

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

Vanguard Funds Public  vs.  iShares STOXX Europe

Vanguard Funds Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

iShares STOXX Europe

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares STOXX Europe are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares STOXX reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Funds and IShares STOXX

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

The idea behind Vanguard Funds Public and iShares STOXX Europe 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.