Correlation Between IShares Nikkei and Vanguard Funds
Can any of the company-specific risk be diversified away by investing in both IShares Nikkei and Vanguard Funds 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 Nikkei and Vanguard Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Nikkei 225 and Vanguard Funds Public, you can compare the effects of market volatilities on IShares Nikkei and Vanguard Funds 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 Nikkei with a short position of Vanguard Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Nikkei and Vanguard Funds.
Diversification Opportunities for IShares Nikkei and Vanguard Funds
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and Vanguard is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding iShares Nikkei 225 and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public and IShares Nikkei 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 Nikkei 225 are associated (or correlated) with Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of IShares Nikkei i.e., IShares Nikkei and Vanguard Funds go up and down completely randomly.
Pair Corralation between IShares Nikkei and Vanguard Funds
Assuming the 90 days trading horizon IShares Nikkei is expected to generate 4.2 times less return on investment than Vanguard Funds. But when comparing it to its historical volatility, iShares Nikkei 225 is 1.3 times less risky than Vanguard Funds. It trades about 0.1 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 10,037 in Vanguard Funds Public on September 2, 2024 and sell it today you would earn a total of 803.00 from holding Vanguard Funds Public or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Nikkei 225 vs. Vanguard Funds Public
Performance |
| Timeline |
| iShares Nikkei 225 |
| Vanguard Funds Public |
IShares Nikkei and Vanguard Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Nikkei and Vanguard Funds
The main advantage of trading using opposite IShares Nikkei and Vanguard Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Nikkei position performs unexpectedly, Vanguard Funds 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 Funds will offset losses from the drop in Vanguard Funds' long position.| IShares Nikkei vs. iShares Govt Bond | IShares Nikkei vs. iShares Global AAA AA | IShares Nikkei vs. iShares Smart City | IShares Nikkei vs. iShares Broad High |
| Vanguard Funds vs. UBS Fund Solutions | Vanguard Funds vs. iShares VII PLC | Vanguard Funds vs. iShares Core SP | Vanguard Funds vs. iShares Core MSCI |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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