Correlation Between IShares Trust and Vanguard Index
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Vanguard Index 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 Index 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 Index Funds, you can compare the effects of market volatilities on IShares Trust and Vanguard Index 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 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Vanguard Index.
Diversification Opportunities for IShares Trust and Vanguard Index
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds 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 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of IShares Trust i.e., IShares Trust and Vanguard Index go up and down completely randomly.
Pair Corralation between IShares Trust and Vanguard Index
Assuming the 90 days trading horizon iShares Trust is expected to generate 1.43 times more return on investment than Vanguard Index. However, IShares Trust is 1.43 times more volatile than Vanguard Index Funds. It trades about 0.13 of its potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.11 per unit of risk. If you would invest 143,218 in iShares Trust on September 20, 2024 and sell it today you would earn a total of 191,182 from holding iShares Trust or generate 133.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. Vanguard Index Funds
Performance |
| Timeline |
| iShares Trust |
| Vanguard Index Funds |
IShares Trust and Vanguard Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Vanguard Index
The main advantage of trading using opposite IShares Trust and Vanguard Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Vanguard Index 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 Index will offset losses from the drop in Vanguard Index's long position.| IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard Index Funds | IShares Trust vs. SPDR SP 500 | IShares Trust vs. Vanguard Bond Index |
| Vanguard Index vs. Vanguard Index Funds | Vanguard Index vs. SPDR SP 500 | Vanguard Index vs. Vanguard Bond Index | Vanguard Index vs. Invesco QQQ Trust |
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.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |