Correlation Between Vanguard FTSE and IShares

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

Diversification Opportunities for Vanguard FTSE and IShares

-0.49

Correlation Coefficient

Vanguard FTSE  IShares

Very good diversification

The 3 months correlation between Vanguard and IShares is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares

If you would invest  4,573  in Vanguard FTSE Emerging on September 13, 2024 and sell it today you would earn a total of  70.50  from holding Vanguard FTSE Emerging or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	9.09%
Values	Daily Returns

Vanguard FTSE Emerging  vs.  IShares

Vanguard FTSE Emerging

Risk-Adjusted Performance

6 of 100

Modest

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

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares 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

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

The idea behind Vanguard FTSE Emerging and IShares 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.