Correlation Between IShares 1 and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both IShares 1 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 1 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 1 5 Year and Vanguard FTSE Canadian, you can compare the effects of market volatilities on IShares 1 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 1 with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and Vanguard FTSE.

Diversification Opportunities for IShares 1 and Vanguard FTSE

-0.04

Correlation Coefficient

IShares 1  Vanguard FTSE

Good diversification

The 3 months correlation between IShares and Vanguard is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 5 Year and Vanguard FTSE Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canadian and IShares 1 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 1 5 Year 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 Canadian has no effect on the direction of IShares 1 i.e., IShares 1 and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares 1 and Vanguard FTSE

Assuming the 90 days trading horizon IShares 1 is expected to generate 1.94 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, iShares 1 5 Year is 4.49 times less risky than Vanguard FTSE. It trades about 0.08 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,742  in Vanguard FTSE Canadian on September 26, 2024 and sell it today you would earn a total of  436.00  from holding Vanguard FTSE Canadian or generate 15.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

iShares 1 5 Year  vs.  Vanguard FTSE Canadian

iShares 1 5

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares 1 5 Year are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, IShares 1 is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard FTSE Canadian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Canadian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IShares 1 and Vanguard FTSE

The main advantage of trading using opposite IShares 1 and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 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.

The idea behind iShares 1 5 Year and Vanguard FTSE Canadian 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.