Correlation Between IShares European and Vanguard USD

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

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

Diversification Opportunities for IShares European and Vanguard USD

-0.75

Correlation Coefficient

IShares European  Vanguard USD

Pay attention - limited upside

The 3 months correlation between IShares and Vanguard is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares European Property and Vanguard USD Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Emerging and IShares European 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 European Property are associated (or correlated) with Vanguard USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Emerging has no effect on the direction of IShares European i.e., IShares European and Vanguard USD go up and down completely randomly.

Pair Corralation between IShares European and Vanguard USD

Assuming the 90 days trading horizon IShares European is expected to generate 1.24 times less return on investment than Vanguard USD. In addition to that, IShares European is 2.79 times more volatile than Vanguard USD Emerging. It trades about 0.04 of its total potential returns per unit of risk. Vanguard USD Emerging is currently generating about 0.13 per unit of volatility. If you would invest  4,395  in Vanguard USD Emerging on September 15, 2024 and sell it today you would earn a total of  673.00  from holding Vanguard USD Emerging or generate 15.31% return on investment over 90 days.

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

iShares European Property  vs.  Vanguard USD Emerging

iShares European Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares European Property has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Vanguard USD Emerging

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Emerging are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard USD is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares European and Vanguard USD

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

The idea behind iShares European Property and Vanguard USD Emerging 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.