Correlation Between IShares Trust and Vanguard World
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Vanguard World 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 Trust and Vanguard World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Vanguard World, you can compare the effects of market volatilities on IShares Trust and Vanguard World 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 Trust with a short position of Vanguard World. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Vanguard World.
Diversification Opportunities for IShares Trust and Vanguard World
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IShares and Vanguard is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World and IShares Trust 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 Trust are associated (or correlated) with Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of IShares Trust i.e., IShares Trust and Vanguard World go up and down completely randomly.
Pair Corralation between IShares Trust and Vanguard World
Assuming the 90 days trading horizon iShares Trust is expected to under-perform the Vanguard World. In addition to that, IShares Trust is 2.24 times more volatile than Vanguard World. It trades about -0.08 of its total potential returns per unit of risk. Vanguard World is currently generating about -0.01 per unit of volatility. If you would invest 562,370 in Vanguard World on August 24, 2024 and sell it today you would lose (2,170) from holding Vanguard World or give up 0.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Trust vs. Vanguard World
Performance |
| Timeline |
| iShares Trust |
| Vanguard World |
IShares Trust and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Vanguard World
The main advantage of trading using opposite IShares Trust and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Vanguard World 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 World will offset losses from the drop in Vanguard World's long position.| IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard STAR Funds | IShares Trust vs. SPDR SP 500 |
| Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard STAR Funds | Vanguard World vs. SPDR SP 500 |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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