Correlation Between Vanguard FTSE and IShares Core
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE 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 FTSE 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 FTSE Developed and iShares Core MSCI, you can compare the effects of market volatilities on Vanguard FTSE 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 FTSE with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares Core.
Diversification Opportunities for Vanguard FTSE and IShares Core
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 Developed 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 MSCI has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Core go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares Core
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.16 times less return on investment than IShares Core. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.03 times less risky than IShares Core. It trades about 0.08 of its potential returns per unit of risk. iShares Core MSCI is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,759 in iShares Core MSCI on August 24, 2024 and sell it today you would earn a total of 433.00 from holding iShares Core MSCI or generate 15.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. iShares Core MSCI
Performance |
| Timeline |
| Vanguard FTSE Developed |
| iShares Core MSCI |
Vanguard FTSE and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares Core
The main advantage of trading using opposite Vanguard FTSE and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Total Market | Vanguard FTSE vs. Vanguard Canadian Aggregate |
| IShares Core vs. iShares Core MSCI | IShares Core vs. BMO MSCI EAFE | IShares Core vs. Vanguard FTSE Developed | IShares Core vs. iShares MSCI EAFE |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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