Correlation Between Vanguard Small and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and IShares Trust 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 Trust 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 Trust, you can compare the effects of market volatilities on Vanguard Small and IShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and IShares Trust.
Diversification Opportunities for Vanguard Small and IShares Trust
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Vanguard Small i.e., Vanguard Small and IShares Trust go up and down completely randomly.
Pair Corralation between Vanguard Small and IShares Trust
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 8.38 times more return on investment than IShares Trust. However, Vanguard Small is 8.38 times more volatile than iShares Trust. It trades about 0.08 of its potential returns per unit of risk. iShares Trust is currently generating about 0.18 per unit of risk. If you would invest 19,095 in Vanguard Small Cap Index on August 31, 2024 and sell it today you would earn a total of 6,956 from holding Vanguard Small Cap Index or generate 36.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. iShares Trust
Performance |
| Timeline |
| Vanguard Small Cap |
| iShares Trust |
Vanguard Small and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and IShares Trust
The main advantage of trading using opposite Vanguard Small and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust'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 |
| IShares Trust vs. Invesco BulletShares 2025 | IShares Trust vs. iShares iBonds Dec | IShares Trust vs. Invesco BulletShares 2026 | IShares Trust vs. iShares iBonds Dec |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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