Correlation Between IShares IV and Vanguard Total

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

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

Diversification Opportunities for IShares IV and Vanguard Total

-0.35

Correlation Coefficient

IShares IV  Vanguard Total

Very good diversification

The 3 months correlation between IShares and Vanguard is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares IV Public and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock and IShares IV 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 IV Public are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of IShares IV i.e., IShares IV and Vanguard Total go up and down completely randomly.

Pair Corralation between IShares IV and Vanguard Total

Assuming the 90 days horizon iShares IV Public is expected to under-perform the Vanguard Total. But the pink sheet apears to be less risky and, when comparing its historical volatility, iShares IV Public is 1.18 times less risky than Vanguard Total. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Vanguard Total Stock is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  28,142  in Vanguard Total Stock on September 26, 2024 and sell it today you would earn a total of  1,570  from holding Vanguard Total Stock or generate 5.58% return on investment over 90 days.

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

iShares IV Public  vs.  Vanguard Total Stock

iShares IV Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares IV Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares IV is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Total Stock

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares IV and Vanguard Total

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

The idea behind iShares IV Public and Vanguard Total Stock 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.