Correlation Between Vanguard Multifactor and IShares Core

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

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

Diversification Opportunities for Vanguard Multifactor and IShares Core

0.99

Correlation Coefficient

Vanguard Multifactor  IShares Core

No risk reduction

The 3 months correlation between Vanguard and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Multifactor and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and Vanguard Multifactor 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 Multifactor are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Vanguard Multifactor i.e., Vanguard Multifactor and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Multifactor and IShares Core

Given the investment horizon of 90 days Vanguard Multifactor is expected to generate 1.07 times less return on investment than IShares Core. In addition to that, Vanguard Multifactor is 1.04 times more volatile than iShares Core SP. It trades about 0.14 of its total potential returns per unit of risk. iShares Core SP is currently generating about 0.15 per unit of volatility. If you would invest  6,058  in iShares Core SP on September 13, 2024 and sell it today you would earn a total of  537.00  from holding iShares Core SP or generate 8.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Multifactor  vs.  iShares Core SP

Vanguard Multifactor

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Multifactor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Vanguard Multifactor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Core SP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward-looking indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Multifactor and IShares Core

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

The idea behind Vanguard Multifactor and iShares Core SP 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.