Correlation Between Vanguard FTSE and IShares Global

Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Emerging and iShares Global 100, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares Global.

Diversification Opportunities for Vanguard FTSE and IShares Global

-0.35

Correlation Coefficient

Vanguard FTSE  IShares Global

Very good diversification

The 3 months correlation between Vanguard and IShares is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and iShares Global 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global 100 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 Emerging 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 100 has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Global go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares Global

Considering the 90-day investment horizon Vanguard FTSE Emerging is expected to under-perform the IShares Global. In addition to that, Vanguard FTSE is 1.02 times more volatile than iShares Global 100. It trades about -0.13 of its total potential returns per unit of risk. iShares Global 100 is currently generating about -0.02 per unit of volatility. If you would invest  10,216  in iShares Global 100 on October 7, 2024 and sell it today you would lose (40.00) from holding iShares Global 100 or give up 0.39% of portfolio value over 90 days.

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

Vanguard FTSE Emerging  vs.  iShares Global 100

Vanguard FTSE Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares Global 100

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global 100 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and IShares Global

The main advantage of trading using opposite Vanguard FTSE and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE Emerging and iShares Global 100 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.