Correlation Between IShares Euro and Vanguard
Can any of the company-specific risk be diversified away by investing in both IShares Euro and Vanguard 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 Euro and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Euro Government and Vanguard SP 500, you can compare the effects of market volatilities on IShares Euro and Vanguard 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 Euro with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Euro and Vanguard.
Diversification Opportunities for IShares Euro and Vanguard
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and Vanguard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Euro Government and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and IShares Euro 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 Euro Government are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of IShares Euro i.e., IShares Euro and Vanguard go up and down completely randomly.
Pair Corralation between IShares Euro and Vanguard
Assuming the 90 days trading horizon IShares Euro is expected to generate 19.78 times less return on investment than Vanguard. But when comparing it to its historical volatility, iShares Euro Government is 5.72 times less risky than Vanguard. It trades about 0.07 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 10,216 in Vanguard SP 500 on August 27, 2024 and sell it today you would earn a total of 654.00 from holding Vanguard SP 500 or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Euro Government vs. Vanguard SP 500
Performance |
| Timeline |
| iShares Euro Government |
| Vanguard SP 500 |
IShares Euro and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Euro and Vanguard
The main advantage of trading using opposite IShares Euro and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Euro position performs unexpectedly, Vanguard 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 will offset losses from the drop in Vanguard's long position.| IShares Euro vs. Vanguard SP 500 | IShares Euro vs. SPDR Dow Jones | IShares Euro vs. iShares SP 500 | IShares Euro vs. iShares China CNY |
| Vanguard vs. Vanguard FTSE All World | Vanguard vs. iShares Core MSCI | Vanguard vs. Vanguard FTSE Emerging |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |