Correlation Between Vanguard International and IShares International

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

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

Diversification Opportunities for Vanguard International and IShares International

0.99

Correlation Coefficient

Vanguard International  IShares International

No risk reduction

The 3 months correlation between Vanguard and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard International High and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International and Vanguard International 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 International High are associated (or correlated) with IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of Vanguard International i.e., Vanguard International and IShares International go up and down completely randomly.

Pair Corralation between Vanguard International and IShares International

Given the investment horizon of 90 days Vanguard International High is expected to generate 0.94 times more return on investment than IShares International. However, Vanguard International High is 1.07 times less risky than IShares International. It trades about 0.07 of its potential returns per unit of risk. iShares International Select is currently generating about 0.05 per unit of risk. If you would invest  5,507  in Vanguard International High on December 2, 2024 and sell it today you would earn a total of  1,730  from holding Vanguard International High or generate 31.41% return on investment over 90 days.

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

Vanguard International High  vs.  iShares International Select

Vanguard International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard International High are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Vanguard International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

iShares International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares International Select are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, IShares International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard International and IShares International

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

The idea behind Vanguard International High and iShares International Select 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.