Correlation Between IShares China and Vanguard LifeStrategy
Can any of the company-specific risk be diversified away by investing in both IShares China and Vanguard LifeStrategy 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 China and Vanguard LifeStrategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares China CNY and Vanguard LifeStrategy 80, you can compare the effects of market volatilities on IShares China and Vanguard LifeStrategy 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 China with a short position of Vanguard LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and Vanguard LifeStrategy.
Diversification Opportunities for IShares China and Vanguard LifeStrategy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Vanguard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and Vanguard LifeStrategy 80 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy and IShares China 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 China CNY are associated (or correlated) with Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of IShares China i.e., IShares China and Vanguard LifeStrategy go up and down completely randomly.
Pair Corralation between IShares China and Vanguard LifeStrategy
Assuming the 90 days trading horizon IShares China is expected to generate 4.78 times less return on investment than Vanguard LifeStrategy. But when comparing it to its historical volatility, iShares China CNY is 3.82 times less risky than Vanguard LifeStrategy. It trades about 0.29 of its potential returns per unit of risk. Vanguard LifeStrategy 80 is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 3,501 in Vanguard LifeStrategy 80 on September 1, 2024 and sell it today you would earn a total of 182.00 from holding Vanguard LifeStrategy 80 or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares China CNY vs. Vanguard LifeStrategy 80
Performance |
| Timeline |
| iShares China CNY |
| Vanguard LifeStrategy |
IShares China and Vanguard LifeStrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and Vanguard LifeStrategy
The main advantage of trading using opposite IShares China and Vanguard LifeStrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, Vanguard LifeStrategy 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 LifeStrategy will offset losses from the drop in Vanguard LifeStrategy's long position.| IShares China vs. iShares Core MSCI | IShares China vs. BlackRock ESG Multi Asset | IShares China vs. Pershing Square Holdings | IShares China vs. ASML Holding NV |
| Vanguard LifeStrategy vs. iShares Core MSCI | Vanguard LifeStrategy vs. BlackRock ESG Multi Asset | Vanguard LifeStrategy vs. Pershing Square Holdings | Vanguard LifeStrategy vs. ASML Holding NV |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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