Correlation Between IShares Edge and Vanguard FTSE
Can any of the company-specific risk be diversified away by investing in both IShares Edge and Vanguard FTSE 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 Edge and Vanguard FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Edge MSCI and Vanguard FTSE Developed, you can compare the effects of market volatilities on IShares Edge and Vanguard FTSE 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 Edge with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Edge and Vanguard FTSE.
Diversification Opportunities for IShares Edge and Vanguard FTSE
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge MSCI and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and IShares Edge 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 Edge MSCI are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of IShares Edge i.e., IShares Edge and Vanguard FTSE go up and down completely randomly.
Pair Corralation between IShares Edge and Vanguard FTSE
Given the investment horizon of 90 days iShares Edge MSCI is expected to generate 1.18 times more return on investment than Vanguard FTSE. However, IShares Edge is 1.18 times more volatile than Vanguard FTSE Developed. It trades about 0.2 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.16 per unit of risk. If you would invest 2,773 in iShares Edge MSCI on September 13, 2024 and sell it today you would earn a total of 62.00 from holding iShares Edge MSCI or generate 2.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Edge MSCI vs. Vanguard FTSE Developed
Performance |
| Timeline |
| iShares Edge MSCI |
| Vanguard FTSE Developed |
IShares Edge and Vanguard FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Edge and Vanguard FTSE
The main advantage of trading using opposite IShares Edge and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Edge position performs unexpectedly, Vanguard FTSE 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 FTSE will offset losses from the drop in Vanguard FTSE's long position.| IShares Edge vs. iShares MSCI Intl | IShares Edge vs. iShares MSCI Intl | IShares Edge vs. iShares MSCI Emerging | IShares Edge vs. iShares Edge MSCI |
| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Value Index | Vanguard FTSE vs. Vanguard Small Cap Value |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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