Correlation Between IShares Core and Vanguard Conservative

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

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

Diversification Opportunities for IShares Core and Vanguard Conservative

0.93

Correlation Coefficient

IShares Core  Vanguard Conservative

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Balanced and Vanguard Conservative ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Conservative ETF and IShares Core 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 iShares Core Balanced are associated (or correlated) with Vanguard Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Conservative ETF has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Conservative go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard Conservative

Assuming the 90 days trading horizon iShares Core Balanced is expected to generate 1.18 times more return on investment than Vanguard Conservative. However, IShares Core is 1.18 times more volatile than Vanguard Conservative ETF. It trades about 0.46 of its potential returns per unit of risk. Vanguard Conservative ETF is currently generating about 0.46 per unit of risk. If you would invest  2,969  in iShares Core Balanced on September 5, 2024 and sell it today you would earn a total of  113.00  from holding iShares Core Balanced or generate 3.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

iShares Core Balanced  vs.  Vanguard Conservative ETF

iShares Core Balanced

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Balanced are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Conservative ETF

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Conservative ETF are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Conservative is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Vanguard Conservative

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

The idea behind iShares Core Balanced and Vanguard Conservative ETF 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.