Correlation Between IShares Infrastructure and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both IShares Infrastructure 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 Infrastructure 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 Infrastructure ETF and Vanguard FTSE Developed, you can compare the effects of market volatilities on IShares Infrastructure 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 Infrastructure with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Infrastructure and Vanguard FTSE.
Diversification Opportunities for IShares Infrastructure and Vanguard FTSE
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Infrastructure ETF and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and IShares Infrastructure 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 Infrastructure ETF 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 Developed has no effect on the direction of IShares Infrastructure i.e., IShares Infrastructure and Vanguard FTSE go up and down completely randomly.
Pair Corralation between IShares Infrastructure and Vanguard FTSE
Given the investment horizon of 90 days iShares Infrastructure ETF is expected to generate 1.26 times more return on investment than Vanguard FTSE. However, IShares Infrastructure is 1.26 times more volatile than Vanguard FTSE Developed. It trades about 0.02 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about -0.15 per unit of risk. If you would invest 4,218 in iShares Infrastructure ETF on January 26, 2024 and sell it today you would earn a total of 11.00 from holding iShares Infrastructure ETF or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Infrastructure ETF vs. Vanguard FTSE Developed
Performance |
| Timeline |
| iShares Infrastructure |
| Vanguard FTSE Developed |
IShares Infrastructure and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Infrastructure and Vanguard FTSE
The main advantage of trading using opposite IShares Infrastructure and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Infrastructure 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 Infrastructure vs. Global X Cloud | IShares Infrastructure vs. Global X Cybersecurity | IShares Infrastructure vs. Invesco Dynamic Leisure | IShares Infrastructure vs. iShares Global Clean |
| Vanguard FTSE vs. SPDR MSCI Emerging | Vanguard FTSE vs. SPDR MSCI USA | Vanguard FTSE vs. SPDR MSCI World | Vanguard FTSE vs. SPDR SSGA Large |
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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