Correlation Between Vanguard Small and IShares Core
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and IShares Core 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 Core 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 Core SP, you can compare the effects of market volatilities on Vanguard Small and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and IShares Core.
Diversification Opportunities for Vanguard Small and IShares Core
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 Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Vanguard Small i.e., Vanguard Small and IShares Core go up and down completely randomly.
Pair Corralation between Vanguard Small and IShares Core
Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.02 times less return on investment than IShares Core. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.34 times less risky than IShares Core. It trades about 0.27 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 11,466 in iShares Core SP on August 24, 2024 and sell it today you would earn a total of 832.00 from holding iShares Core SP or generate 7.26% 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 Core SP
Performance |
| Timeline |
| Vanguard Small Cap |
| iShares Core SP |
Vanguard Small and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and IShares Core
The main advantage of trading using opposite Vanguard Small and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core'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 Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP Small Cap | IShares Core vs. iShares SP 500 |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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