Correlation Between Vanguard FTSE and IShares Edge
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and IShares Edge 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 Edge 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 Edge MSCI, you can compare the effects of market volatilities on Vanguard FTSE and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares Edge.
Diversification Opportunities for Vanguard FTSE and IShares Edge
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and IShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge 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 Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Edge go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares Edge
Assuming the 90 days trading horizon Vanguard FTSE is expected to generate 1.03 times less return on investment than IShares Edge. In addition to that, Vanguard FTSE is 1.12 times more volatile than iShares Edge MSCI. It trades about 0.06 of its total potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.07 per unit of volatility. If you would invest 11,356 in iShares Edge MSCI on September 4, 2024 and sell it today you would earn a total of 2,742 from holding iShares Edge MSCI or generate 24.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. iShares Edge MSCI
Performance |
| Timeline |
| Vanguard FTSE Developed |
| iShares Edge MSCI |
Vanguard FTSE and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares Edge
The main advantage of trading using opposite Vanguard FTSE and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge'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 Edge vs. Vanguard FTSE Developed | IShares Edge vs. HSBC MSCI Japan | IShares Edge vs. iShares II Public | IShares Edge 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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