Correlation Between Vanguard FTSE and IShares ESG
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and IShares ESG 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 FTSE and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Canada and iShares ESG Aware, you can compare the effects of market volatilities on Vanguard FTSE and IShares ESG 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 FTSE with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares ESG.
Diversification Opportunities for Vanguard FTSE and IShares ESG
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Canada and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and Vanguard FTSE 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 FTSE Canada are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares ESG go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares ESG
Assuming the 90 days trading horizon Vanguard FTSE Canada is expected to generate 0.97 times more return on investment than IShares ESG. However, Vanguard FTSE Canada is 1.04 times less risky than IShares ESG. It trades about 0.13 of its potential returns per unit of risk. iShares ESG Aware is currently generating about 0.12 per unit of risk. If you would invest 4,132 in Vanguard FTSE Canada on September 2, 2024 and sell it today you would earn a total of 1,541 from holding Vanguard FTSE Canada or generate 37.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Canada vs. iShares ESG Aware
Performance |
| Timeline |
| Vanguard FTSE Canada |
| iShares ESG Aware |
Vanguard FTSE and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares ESG
The main advantage of trading using opposite Vanguard FTSE and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| Vanguard FTSE vs. iShares SPTSX 60 | Vanguard FTSE vs. iShares Core SPTSX | Vanguard FTSE vs. Vanguard FTSE Canada | Vanguard FTSE vs. Global X SPTSX |
| IShares ESG vs. iShares ESG MSCI | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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