Correlation Between IShares SP and Vanguard Global

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

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

Diversification Opportunities for IShares SP and Vanguard Global

0.83

Correlation Coefficient

IShares SP  Vanguard Global

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Global and Vanguard Global Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Global Momentum and IShares SP 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 SP Global are associated (or correlated) with Vanguard Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Global Momentum has no effect on the direction of IShares SP i.e., IShares SP and Vanguard Global go up and down completely randomly.

Pair Corralation between IShares SP and Vanguard Global

Assuming the 90 days trading horizon iShares SP Global is expected to generate 0.97 times more return on investment than Vanguard Global. However, iShares SP Global is 1.03 times less risky than Vanguard Global. It trades about 0.29 of its potential returns per unit of risk. Vanguard Global Momentum is currently generating about -0.06 per unit of risk. If you would invest  5,762  in iShares SP Global on September 23, 2024 and sell it today you would earn a total of  320.00  from holding iShares SP Global or generate 5.55% return on investment over 90 days.

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

iShares SP Global  vs.  Vanguard Global Momentum

iShares SP Global

Risk-Adjusted Performance

15 of 100

Good

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

Vanguard Global Momentum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Global Momentum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares SP and Vanguard Global

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

The idea behind iShares SP Global and Vanguard Global Momentum 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.