Correlation Between IShares Currency and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both IShares Currency 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 Currency 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 Currency Hedged and Vanguard FTSE All World, you can compare the effects of market volatilities on IShares Currency 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 Currency with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Currency and Vanguard FTSE.
Diversification Opportunities for IShares Currency and Vanguard FTSE
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding iShares Currency Hedged and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All and IShares Currency 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 Currency Hedged 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 All has no effect on the direction of IShares Currency i.e., IShares Currency and Vanguard FTSE go up and down completely randomly.
Pair Corralation between IShares Currency and Vanguard FTSE
Given the investment horizon of 90 days iShares Currency Hedged is expected to generate 0.8 times more return on investment than Vanguard FTSE. However, iShares Currency Hedged is 1.24 times less risky than Vanguard FTSE. It trades about -0.02 of its potential returns per unit of risk. Vanguard FTSE All World is currently generating about -0.09 per unit of risk. If you would invest 3,117 in iShares Currency Hedged on January 24, 2024 and sell it today you would lose (9.00) from holding iShares Currency Hedged or give up 0.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Currency Hedged vs. Vanguard FTSE All World
Performance |
| Timeline |
| iShares Currency Hedged |
| Vanguard FTSE All |
IShares Currency and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Currency and Vanguard FTSE
The main advantage of trading using opposite IShares Currency and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Currency 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 Currency vs. iShares Currency Hedged | IShares Currency vs. iShares MSCI Intl | IShares Currency vs. iShares Currency Hedged |
| Vanguard FTSE vs. Vanguard Global ex US | Vanguard FTSE vs. Vanguard FTSE All World | Vanguard FTSE vs. Vanguard Small Cap Value | Vanguard FTSE vs. Vanguard FTSE Pacific |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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