Correlation Between Vanguard World and IShares Global

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

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

Diversification Opportunities for Vanguard World and IShares Global

0.0

Correlation Coefficient

Vanguard World  IShares Global

Pay attention - limited upside

The 3 months correlation between Vanguard and IShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber and Vanguard World 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 Vanguard World are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Timber has no effect on the direction of Vanguard World i.e., Vanguard World and IShares Global go up and down completely randomly.

Pair Corralation between Vanguard World and IShares Global

If you would invest  408,841  in Vanguard World on September 15, 2024 and sell it today you would earn a total of  42,109  from holding Vanguard World or generate 10.3% return on investment over 90 days.

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

Vanguard World  vs.  iShares Global Timber

Vanguard World

Risk-Adjusted Performance

14 of 100

Good

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

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard World and IShares Global

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

The idea behind Vanguard World and iShares Global Timber 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.