Correlation Between Vanguard FTSE and IShares AEX
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and IShares AEX 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 AEX 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 AEX UCITS, you can compare the effects of market volatilities on Vanguard FTSE and IShares AEX 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 AEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares AEX.
Diversification Opportunities for Vanguard FTSE and IShares AEX
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AEX UCITS 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 AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AEX UCITS has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares AEX go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares AEX
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 2.75 times less return on investment than IShares AEX. But when comparing it to its historical volatility, Vanguard FTSE Developed is 1.02 times less risky than IShares AEX. It trades about 0.02 of its potential returns per unit of risk. iShares AEX UCITS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,778 in iShares AEX UCITS on September 4, 2024 and sell it today you would earn a total of 95.00 from holding iShares AEX UCITS or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. iShares AEX UCITS
Performance |
| Timeline |
| Vanguard FTSE Developed |
| iShares AEX UCITS |
Vanguard FTSE and IShares AEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares AEX
The main advantage of trading using opposite Vanguard FTSE and IShares AEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, IShares AEX 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 AEX will offset losses from the drop in IShares AEX's long position.| Vanguard FTSE vs. HSBC MSCI Japan | Vanguard FTSE vs. iShares II Public | Vanguard FTSE vs. Hydratec Industries NV | Vanguard FTSE vs. VanEck Polkadot ETN |
| IShares AEX vs. Vanguard FTSE Developed | IShares AEX vs. HSBC MSCI Japan | IShares AEX vs. iShares II Public | IShares AEX vs. Hydratec Industries NV |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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