Correlation Between Vanguard Funds and IShares SP

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

By analyzing existing cross correlation between Vanguard Funds Public and iShares SP 500, you can compare the effects of market volatilities on Vanguard Funds and IShares SP 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 Vanguard Funds with a short position of IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and IShares SP.

Diversification Opportunities for Vanguard Funds and IShares SP

0.92

Correlation Coefficient

Vanguard Funds  IShares SP

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and Vanguard Funds 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 Vanguard Funds Public are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of Vanguard Funds i.e., Vanguard Funds and IShares SP go up and down completely randomly.

Pair Corralation between Vanguard Funds and IShares SP

Assuming the 90 days trading horizon Vanguard Funds is expected to generate 1.21 times less return on investment than IShares SP. But when comparing it to its historical volatility, Vanguard Funds Public is 1.16 times less risky than IShares SP. It trades about 0.13 of its potential returns per unit of risk. iShares SP 500 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,707  in iShares SP 500 on March 14, 2024 and sell it today you would earn a total of  271.00  from holding iShares SP 500 or generate 5.76% return on investment over 90 days.

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

Vanguard Funds Public  vs.  iShares SP 500

Vanguard Funds Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard Funds is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares SP 500

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Funds and IShares SP

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

The idea behind Vanguard Funds Public and iShares SP 500 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.