Correlation Between Vanguard FTSE and IShares II

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

By analyzing existing cross correlation between Vanguard FTSE All World and iShares II Public, you can compare the effects of market volatilities on Vanguard FTSE and IShares II 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 II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares II.

Diversification Opportunities for Vanguard FTSE and IShares II

-0.29

Correlation Coefficient

Vanguard FTSE  IShares II

Very good diversification

The 3 months correlation between Vanguard and IShares is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and iShares II Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares II Public 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 All World are associated (or correlated) with IShares II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares II Public has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares II go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares II

Assuming the 90 days trading horizon Vanguard FTSE All World is expected to under-perform the IShares II. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE All World is 1.33 times less risky than IShares II. The etf trades about -0.06 of its potential returns per unit of risk. The iShares II Public is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,859  in iShares II Public on September 23, 2024 and sell it today you would earn a total of  81.00  from holding iShares II Public or generate 1.67% return on investment over 90 days.

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

Vanguard FTSE All World  vs.  iShares II Public

Vanguard FTSE All

Risk-Adjusted Performance

14 of 100

Good

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

iShares II Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares II Public has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares II 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 FTSE and IShares II

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

The idea behind Vanguard FTSE All World and iShares II Public 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..