Correlation Between IShares VII and Vanguard FTSE

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

Diversification Opportunities for IShares VII and Vanguard FTSE

0.5

Correlation Coefficient

IShares VII  Vanguard FTSE

Very weak diversification

The 3 months correlation between IShares and Vanguard is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All and IShares VII 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 VII PLC 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 All has no effect on the direction of IShares VII i.e., IShares VII and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares VII and Vanguard FTSE

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 1.61 times more return on investment than Vanguard FTSE. However, IShares VII is 1.61 times more volatile than Vanguard FTSE All World. It trades about 0.06 of its potential returns per unit of risk. Vanguard FTSE All World is currently generating about -0.02 per unit of risk. If you would invest  23,660  in iShares VII PLC on September 25, 2024 and sell it today you would earn a total of  305.00  from holding iShares VII PLC or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

iShares VII PLC  vs.  Vanguard FTSE All World

iShares VII PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares VII is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard FTSE All

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares VII and Vanguard FTSE

The main advantage of trading using opposite IShares VII and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII 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 VII PLC and Vanguard FTSE All World 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.