Correlation Between IShares Utilities and Vanguard Utilities
Can any of the company-specific risk be diversified away by investing in both IShares Utilities and Vanguard Utilities 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 Utilities 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 Utilities Index, you can compare the effects of market volatilities on IShares Utilities and Vanguard Utilities 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 Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and Vanguard Utilities.
Diversification Opportunities for IShares Utilities and Vanguard Utilities
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and Vanguard Utilities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Utilities Index 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Utilities Index has no effect on the direction of IShares Utilities i.e., IShares Utilities and Vanguard Utilities go up and down completely randomly.
Pair Corralation between IShares Utilities and Vanguard Utilities
Considering the 90-day investment horizon iShares Utilities ETF is expected to generate 0.94 times more return on investment than Vanguard Utilities. However, iShares Utilities ETF is 1.07 times less risky than Vanguard Utilities. It trades about 0.03 of its potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.02 per unit of risk. If you would invest 10,301 in iShares Utilities ETF on August 25, 2024 and sell it today you would earn a total of 63.00 from holding iShares Utilities ETF or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Utilities ETF vs. Vanguard Utilities Index
Performance |
| Timeline |
| iShares Utilities ETF |
| Vanguard Utilities Index |
IShares Utilities and Vanguard Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and Vanguard Utilities
The main advantage of trading using opposite IShares Utilities and Vanguard Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities position performs unexpectedly, Vanguard Utilities 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 Utilities will offset losses from the drop in Vanguard Utilities' 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 Utilities vs. Vanguard Consumer Staples | Vanguard Utilities vs. Vanguard Materials Index | Vanguard Utilities vs. Vanguard Communication Services | Vanguard Utilities vs. Vanguard Financials Index |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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