Correlation Between IShares Dow and Vanguard
Can any of the company-specific risk be diversified away by investing in both IShares Dow and Vanguard 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 Dow and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Dow Jones and Vanguard SP 500, you can compare the effects of market volatilities on IShares Dow and Vanguard 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 Dow with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Dow and Vanguard.
Diversification Opportunities for IShares Dow and Vanguard
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Dow Jones and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 and IShares Dow 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 Dow Jones are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of IShares Dow i.e., IShares Dow and Vanguard go up and down completely randomly.
Pair Corralation between IShares Dow and Vanguard
Considering the 90-day investment horizon IShares Dow is expected to generate 1.01 times less return on investment than Vanguard. In addition to that, IShares Dow is 1.02 times more volatile than Vanguard SP 500. It trades about 0.12 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.13 per unit of volatility. If you would invest 34,099 in Vanguard SP 500 on September 12, 2024 and sell it today you would earn a total of 21,620 from holding Vanguard SP 500 or generate 63.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
iShares Dow Jones vs. Vanguard SP 500
Performance |
| Timeline |
| iShares Dow Jones |
| Vanguard SP 500 |
IShares Dow and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Dow and Vanguard
The main advantage of trading using opposite IShares Dow and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Dow position performs unexpectedly, Vanguard 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 will offset losses from the drop in Vanguard's long position.| IShares Dow vs. Vanguard SP 500 | IShares Dow vs. Vanguard Real Estate | IShares Dow vs. Vanguard Total Bond | IShares Dow vs. Vanguard High Dividend |
| Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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