Correlation Between IShares Global and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both IShares Global and Vanguard Industrials 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 Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Industrials and Vanguard Industrials Index, you can compare the effects of market volatilities on IShares Global and Vanguard Industrials 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 Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Vanguard Industrials.
Diversification Opportunities for IShares Global and Vanguard Industrials
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Industrials and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials 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 Industrials are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of IShares Global i.e., IShares Global and Vanguard Industrials go up and down completely randomly.
Pair Corralation between IShares Global and Vanguard Industrials
Considering the 90-day investment horizon IShares Global is expected to generate 1.28 times less return on investment than Vanguard Industrials. But when comparing it to its historical volatility, iShares Global Industrials is 1.17 times less risky than Vanguard Industrials. It trades about 0.15 of its potential returns per unit of risk. Vanguard Industrials Index is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 21,616 in Vanguard Industrials Index on January 24, 2024 and sell it today you would earn a total of 1,755 from holding Vanguard Industrials Index or generate 8.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.41% |
| Values | Daily Returns |
iShares Global Industrials vs. Vanguard Industrials Index
Performance |
| Timeline |
| iShares Global Indus |
| Vanguard Industrials |
IShares Global and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and Vanguard Industrials
The main advantage of trading using opposite IShares Global and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, Vanguard Industrials 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 Industrials will offset losses from the drop in Vanguard Industrials' long position.| IShares Global vs. Materials Select Sector | IShares Global vs. Consumer Discretionary Select | IShares Global vs. Consumer Staples Select | IShares Global vs. Health Care Select |
| Vanguard Industrials vs. Materials Select Sector | Vanguard Industrials vs. Consumer Discretionary Select | Vanguard Industrials vs. Consumer Staples Select | Vanguard Industrials vs. Health Care Select |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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