Correlation Between IShares Financial and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both IShares Financial and Vanguard Consumer 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 Financial and Vanguard Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Financial Services and Vanguard Consumer Discretionary, you can compare the effects of market volatilities on IShares Financial and Vanguard Consumer 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 Financial with a short position of Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financial and Vanguard Consumer.
Diversification Opportunities for IShares Financial and Vanguard Consumer
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financial Services and Vanguard Consumer Discretionar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Consumer and IShares Financial 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 Financial Services are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Consumer has no effect on the direction of IShares Financial i.e., IShares Financial and Vanguard Consumer go up and down completely randomly.
Pair Corralation between IShares Financial and Vanguard Consumer
Considering the 90-day investment horizon iShares Financial Services is expected to generate 0.87 times more return on investment than Vanguard Consumer. However, iShares Financial Services is 1.15 times less risky than Vanguard Consumer. It trades about 0.17 of its potential returns per unit of risk. Vanguard Consumer Discretionary is currently generating about 0.09 per unit of risk. If you would invest 5,389 in iShares Financial Services on August 24, 2024 and sell it today you would earn a total of 2,658 from holding iShares Financial Services or generate 49.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Financial Services vs. Vanguard Consumer Discretionar
Performance |
| Timeline |
| iShares Financial |
| Vanguard Consumer |
IShares Financial and Vanguard Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financial and Vanguard Consumer
The main advantage of trading using opposite IShares Financial and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financial position performs unexpectedly, Vanguard Consumer 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 Consumer will offset losses from the drop in Vanguard Consumer's long position.| IShares Financial vs. UBS AG London | IShares Financial vs. UBS AG London | IShares Financial vs. ETRACS Quarterly Pay | IShares Financial vs. ETRACS 2xMonthly Pay |
| Vanguard Consumer vs. Vanguard Consumer Staples | Vanguard Consumer vs. Vanguard Industrials Index | Vanguard Consumer vs. Vanguard Communication Services | Vanguard Consumer vs. Vanguard Materials 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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