Correlation Between IShares Global and Vanguard FTSE

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

Diversification Opportunities for IShares Global and Vanguard FTSE

0.23

Correlation Coefficient

IShares Global  Vanguard FTSE

Modest diversification

The 3 months correlation between IShares and Vanguard is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Monthly 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 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 Monthly 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 Global i.e., IShares Global and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares Global and Vanguard FTSE

Assuming the 90 days trading horizon iShares Global Monthly is expected to generate 0.78 times more return on investment than Vanguard FTSE. However, iShares Global Monthly is 1.28 times less risky than Vanguard FTSE. It trades about -0.05 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about -0.17 per unit of risk. If you would invest  2,201  in iShares Global Monthly on September 26, 2024 and sell it today you would lose (42.00) from holding iShares Global Monthly or give up 1.91% of portfolio value over 90 days.

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

iShares Global Monthly  vs.  Vanguard FTSE Canadian

iShares Global Monthly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Monthly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, IShares Global 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 Global and Vanguard FTSE

The main advantage of trading using opposite IShares Global and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 Global Monthly 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.