Correlation Between IShares Global and Vanguard

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

By analyzing existing cross correlation between iShares Global Timber and Vanguard SP 500, you can compare the effects of market volatilities on IShares Global and Vanguard 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 IShares Global with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Vanguard.

Diversification Opportunities for IShares Global and Vanguard

-0.75

Correlation Coefficient

IShares Global  Vanguard

Pay attention - limited upside

The 3 months correlation between IShares and Vanguard is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Timber and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and IShares Global 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 iShares Global Timber are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of IShares Global i.e., IShares Global and Vanguard go up and down completely randomly.

Pair Corralation between IShares Global and Vanguard

Assuming the 90 days trading horizon iShares Global Timber is expected to under-perform the Vanguard. In addition to that, IShares Global is 1.85 times more volatile than Vanguard SP 500. It trades about -0.3 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.07 per unit of volatility. If you would invest  10,042  in Vanguard SP 500 on September 28, 2024 and sell it today you would earn a total of  74.00  from holding Vanguard SP 500 or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

iShares Global Timber  vs.  Vanguard SP 500

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Vanguard SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Global and Vanguard

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

The idea behind iShares Global Timber and Vanguard SP 500 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.