Correlation Between Vanguard Total and IShares Global

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

Diversification Opportunities for Vanguard Total and IShares Global

0.79

Correlation Coefficient

Vanguard Total  IShares Global

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Market and iShares Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Consumer and Vanguard Total 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 Total Market 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 Consumer has no effect on the direction of Vanguard Total i.e., Vanguard Total and IShares Global go up and down completely randomly.

Pair Corralation between Vanguard Total and IShares Global

Assuming the 90 days trading horizon Vanguard Total Market is expected to generate 1.43 times more return on investment than IShares Global. However, Vanguard Total is 1.43 times more volatile than iShares Global Consumer. It trades about 0.25 of its potential returns per unit of risk. iShares Global Consumer is currently generating about 0.15 per unit of risk. If you would invest  45,561  in Vanguard Total Market on September 25, 2024 and sell it today you would earn a total of  1,654  from holding Vanguard Total Market or generate 3.63% return on investment over 90 days.

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

Vanguard Total Market  vs.  iShares Global Consumer

Vanguard Total Market

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Market are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard Total unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Global Consumer

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and IShares Global

The main advantage of trading using opposite Vanguard Total and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total Market and iShares Global Consumer 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.