Correlation Between Vanguard FTSE and IShares Expanded

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

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

Diversification Opportunities for Vanguard FTSE and IShares Expanded

-0.33

Correlation Coefficient

Vanguard FTSE  IShares Expanded

Very good diversification

The 3 months correlation between Vanguard and IShares is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Pacific and iShares Expanded Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech and Vanguard FTSE 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 FTSE Pacific are associated (or correlated) with IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Expanded go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares Expanded

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 3.01 times less return on investment than IShares Expanded. But when comparing it to its historical volatility, Vanguard FTSE Pacific is 1.28 times less risky than IShares Expanded. It trades about 0.1 of its potential returns per unit of risk. iShares Expanded Tech is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  9,614  in iShares Expanded Tech on September 2, 2024 and sell it today you would earn a total of  519.00  from holding iShares Expanded Tech or generate 5.4% return on investment over 90 days.

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

Vanguard FTSE Pacific  vs.  iShares Expanded Tech

Vanguard FTSE Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Vanguard FTSE is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Expanded Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IShares Expanded displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard FTSE and IShares Expanded

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

The idea behind Vanguard FTSE Pacific and iShares Expanded Tech 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.