Correlation Between IShares V and Vanguard Total

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

Diversification Opportunities for IShares V and Vanguard Total

-0.75

Correlation Coefficient

IShares V  Vanguard Total

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 V 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 V 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 V 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 V i.e., IShares V and Vanguard Total go up and down completely randomly.

Pair Corralation between IShares V and Vanguard Total

Assuming the 90 days horizon iShares V Public is expected to under-perform the Vanguard Total. In addition to that, IShares V is 1.38 times more volatile than Vanguard Total Stock. It trades about -0.15 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.18 per unit of volatility. If you would invest  27,720  in Vanguard Total Stock on September 17, 2024 and sell it today you would earn a total of  2,273  from holding Vanguard Total Stock or generate 8.2% return on investment over 90 days.

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

iShares V Public  vs.  Vanguard Total Stock

iShares V Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares V Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Vanguard Total Stock

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares V and Vanguard Total

The main advantage of trading using opposite IShares V and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares V 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 V 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.