Correlation Between IShares High and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both IShares High and Vanguard FTSE 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 High and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares High Quality and Vanguard FTSE Canada, you can compare the effects of market volatilities on IShares High and Vanguard FTSE 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 High with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares High and Vanguard FTSE.
Diversification Opportunities for IShares High and Vanguard FTSE
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Vanguard is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares High Quality and Vanguard FTSE Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canada and IShares High 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 High Quality are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canada has no effect on the direction of IShares High i.e., IShares High and Vanguard FTSE go up and down completely randomly.
Pair Corralation between IShares High and Vanguard FTSE
Assuming the 90 days trading horizon IShares High is expected to generate 2.98 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, iShares High Quality is 1.32 times less risky than Vanguard FTSE. It trades about 0.04 of its potential returns per unit of risk. Vanguard FTSE Canada is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,014 in Vanguard FTSE Canada on September 24, 2024 and sell it today you would earn a total of 1,445 from holding Vanguard FTSE Canada or generate 36.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.2% |
Values | Daily Returns |
iShares High Quality vs. Vanguard FTSE Canada
Performance |
Timeline |
iShares High Quality |
Vanguard FTSE Canada |
IShares High and Vanguard FTSE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares High and Vanguard FTSE
The main advantage of trading using opposite IShares High and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares High position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.IShares High vs. iShares Core Canadian | IShares High vs. iShares Core Canadian | IShares High vs. iShares Canadian Real | IShares High vs. iShares Canadian Value |
Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Aggregate |
Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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