Correlation Between Vanguard Small and IShares VII
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and IShares VII 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 Vanguard Small and IShares VII into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and iShares VII Public, you can compare the effects of market volatilities on Vanguard Small and IShares VII 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 Vanguard Small with a short position of IShares VII. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and IShares VII.
Diversification Opportunities for Vanguard Small and IShares VII
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and iShares VII Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares VII Public and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with IShares VII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares VII Public has no effect on the direction of Vanguard Small i.e., Vanguard Small and IShares VII go up and down completely randomly.
Pair Corralation between Vanguard Small and IShares VII
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.23 times more return on investment than IShares VII. However, Vanguard Small is 1.23 times more volatile than iShares VII Public. It trades about 0.14 of its potential returns per unit of risk. iShares VII Public is currently generating about 0.09 per unit of risk. If you would invest 24,060 in Vanguard Small Cap Index on September 12, 2024 and sell it today you would earn a total of 1,407 from holding Vanguard Small Cap Index or generate 5.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. iShares VII Public
Performance |
| Timeline |
| Vanguard Small Cap |
| iShares VII Public |
Vanguard Small and IShares VII Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and IShares VII
The main advantage of trading using opposite Vanguard Small and IShares VII positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, IShares VII 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 IShares VII will offset losses from the drop in IShares VII's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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