Correlation Between IShares Utilities and Vanguard Momentum
Can any of the company-specific risk be diversified away by investing in both IShares Utilities and Vanguard Momentum 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 Utilities and Vanguard Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Utilities ETF and Vanguard Momentum Factor, you can compare the effects of market volatilities on IShares Utilities and Vanguard Momentum 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 Utilities with a short position of Vanguard Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and Vanguard Momentum.
Diversification Opportunities for IShares Utilities and Vanguard Momentum
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 Utilities ETF and Vanguard Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Momentum Factor and IShares Utilities 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 Utilities ETF are associated (or correlated) with Vanguard Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Momentum Factor has no effect on the direction of IShares Utilities i.e., IShares Utilities and Vanguard Momentum go up and down completely randomly.
Pair Corralation between IShares Utilities and Vanguard Momentum
Considering the 90-day investment horizon IShares Utilities is expected to generate 2.26 times less return on investment than Vanguard Momentum. But when comparing it to its historical volatility, iShares Utilities ETF is 1.22 times less risky than Vanguard Momentum. It trades about 0.21 of its potential returns per unit of risk. Vanguard Momentum Factor is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 16,191 in Vanguard Momentum Factor on September 1, 2024 and sell it today you would earn a total of 1,623 from holding Vanguard Momentum Factor or generate 10.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Utilities ETF vs. Vanguard Momentum Factor
Performance |
| Timeline |
| iShares Utilities ETF |
| Vanguard Momentum Factor |
IShares Utilities and Vanguard Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and Vanguard Momentum
The main advantage of trading using opposite IShares Utilities and Vanguard Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities position performs unexpectedly, Vanguard Momentum 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 Momentum will offset losses from the drop in Vanguard Momentum's long position.| IShares Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
| Vanguard Momentum vs. Vanguard Quality Factor | Vanguard Momentum vs. Vanguard Multifactor | Vanguard Momentum vs. Vanguard Value Factor | Vanguard Momentum vs. Vanguard Minimum Volatility |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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