Correlation Between Vanguard FTSE and IShares Currency
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and IShares Currency 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 Currency into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE All World and iShares Currency Hedged, you can compare the effects of market volatilities on Vanguard FTSE and IShares Currency 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 Currency. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares Currency.
Diversification Opportunities for Vanguard FTSE and IShares Currency
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE All World and iShares Currency Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Currency Hedged 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 All World are associated (or correlated) with IShares Currency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Currency Hedged has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Currency go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares Currency
Considering the 90-day investment horizon Vanguard FTSE All World is expected to under-perform the IShares Currency. In addition to that, Vanguard FTSE is 1.28 times more volatile than iShares Currency Hedged. It trades about -0.16 of its total potential returns per unit of risk. iShares Currency Hedged is currently generating about 0.0 per unit of volatility. If you would invest 3,517 in iShares Currency Hedged on August 25, 2024 and sell it today you would lose (2.00) from holding iShares Currency Hedged or give up 0.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE All World vs. iShares Currency Hedged
Performance |
| Timeline |
| Vanguard FTSE All |
| iShares Currency Hedged |
Vanguard FTSE and IShares Currency Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares Currency
The main advantage of trading using opposite Vanguard FTSE and IShares Currency positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, IShares Currency 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 Currency will offset losses from the drop in IShares Currency's long position.| Vanguard FTSE vs. Vanguard FTSE Emerging | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Total Bond | Vanguard FTSE vs. Vanguard FTSE All World |
| IShares Currency vs. Dimensional Core Equity | IShares Currency vs. Dimensional Emerging Core | IShares Currency vs. Dimensional Targeted Value | IShares Currency vs. Dimensional Small Cap |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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