Correlation Between Vanguard EUR and IShares II
Can any of the company-specific risk be diversified away by investing in both Vanguard EUR and IShares II 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 EUR and IShares II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard EUR Eurozone and iShares II Public, you can compare the effects of market volatilities on Vanguard EUR and IShares II 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 EUR with a short position of IShares II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard EUR and IShares II.
Diversification Opportunities for Vanguard EUR and IShares II
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard EUR Eurozone and iShares II Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares II Public and Vanguard EUR 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 EUR Eurozone are associated (or correlated) with IShares II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares II Public has no effect on the direction of Vanguard EUR i.e., Vanguard EUR and IShares II go up and down completely randomly.
Pair Corralation between Vanguard EUR and IShares II
Assuming the 90 days trading horizon Vanguard EUR is expected to generate 1.1 times less return on investment than IShares II. But when comparing it to its historical volatility, Vanguard EUR Eurozone is 1.24 times less risky than IShares II. It trades about 0.1 of its potential returns per unit of risk. iShares II Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 14,927 in iShares II Public on September 4, 2024 and sell it today you would earn a total of 1,496 from holding iShares II Public or generate 10.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard EUR Eurozone vs. iShares II Public
Performance |
| Timeline |
| Vanguard EUR Eurozone |
| iShares II Public |
Vanguard EUR and IShares II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard EUR and IShares II
The main advantage of trading using opposite Vanguard EUR and IShares II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard EUR position performs unexpectedly, IShares II 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 II will offset losses from the drop in IShares II's long position.| Vanguard EUR vs. Vanguard FTSE All World | Vanguard EUR vs. Vanguard FTSE Developed | Vanguard EUR vs. Vanguard FTSE All World | Vanguard EUR vs. Vanguard FTSE Developed |
| IShares II vs. Vanguard FTSE Developed | IShares II vs. HSBC MSCI Japan | IShares II vs. iShares II Public | IShares II 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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