Correlation Between IShares Core and Vanguard Small
Can any of the company-specific risk be diversified away by investing in both IShares Core and Vanguard Small 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 Core and Vanguard Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and Vanguard Small Cap Index, you can compare the effects of market volatilities on IShares Core and Vanguard Small 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 Core with a short position of Vanguard Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard Small.
Diversification Opportunities for IShares Core and Vanguard Small
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Vanguard Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and IShares Core 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 Core SP are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Small go up and down completely randomly.
Pair Corralation between IShares Core and Vanguard Small
Considering the 90-day investment horizon IShares Core is expected to generate 1.0 times less return on investment than Vanguard Small. In addition to that, IShares Core is 1.33 times more volatile than Vanguard Small Cap Index. It trades about 0.22 of its total potential returns per unit of risk. Vanguard Small Cap Index is currently generating about 0.29 per unit of volatility. If you would invest 23,914 in Vanguard Small Cap Index on August 27, 2024 and sell it today you would earn a total of 1,859 from holding Vanguard Small Cap Index or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. Vanguard Small Cap Index
Performance |
| Timeline |
| iShares Core SP |
| Vanguard Small Cap |
IShares Core and Vanguard Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Vanguard Small
The main advantage of trading using opposite IShares Core and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Vanguard Small 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 Small will offset losses from the drop in Vanguard Small's long position.| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP Small Cap | IShares Core vs. iShares SP 500 |
| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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