Correlation Between Vanguard FTSE and IShares JP

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

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

Diversification Opportunities for Vanguard FTSE and IShares JP

-0.87

Correlation Coefficient

Vanguard FTSE  IShares JP

Pay attention - limited upside

The 3 months correlation between Vanguard and IShares is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares JP go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares JP

Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the IShares JP. In addition to that, Vanguard FTSE is 1.83 times more volatile than iShares JP Morgan. It trades about -0.39 of its total potential returns per unit of risk. iShares JP Morgan is currently generating about 0.3 per unit of volatility. If you would invest  6,975  in iShares JP Morgan on October 8, 2024 and sell it today you would earn a total of  155.00  from holding iShares JP Morgan or generate 2.22% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  iShares JP Morgan

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

iShares JP Morgan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares JP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard FTSE and IShares JP

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

The idea behind Vanguard FTSE Developed and iShares JP Morgan 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.