Correlation Between IShares Expanded and Vanguard Information

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

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

Diversification Opportunities for IShares Expanded and Vanguard Information

0.89

Correlation Coefficient

IShares Expanded  Vanguard Information

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information and IShares Expanded 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 Expanded Tech Software are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of IShares Expanded i.e., IShares Expanded and Vanguard Information go up and down completely randomly.

Pair Corralation between IShares Expanded and Vanguard Information

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to generate 0.99 times more return on investment than Vanguard Information. However, iShares Expanded Tech Software is 1.01 times less risky than Vanguard Information. It trades about 0.28 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.19 per unit of risk. If you would invest  8,471  in iShares Expanded Tech Software on September 4, 2024 and sell it today you would earn a total of  2,015  from holding iShares Expanded Tech Software or generate 23.79% return on investment over 90 days.

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

iShares Expanded Tech Software  vs.  Vanguard Information Technolog

iShares Expanded Tech

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech Software are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, IShares Expanded showed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Information

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Vanguard Information unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Expanded and Vanguard Information

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

The idea behind iShares Expanded Tech Software and Vanguard Information Technology 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.