Correlation Between Vanguard Multifactor and IShares Small
Can any of the company-specific risk be diversified away by investing in both Vanguard Multifactor and IShares Small 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 Multifactor and IShares Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Multifactor and iShares Small Cap, you can compare the effects of market volatilities on Vanguard Multifactor and IShares Small 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 Multifactor with a short position of IShares Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Multifactor and IShares Small.
Diversification Opportunities for Vanguard Multifactor and IShares Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Multifactor and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap and Vanguard Multifactor 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 Multifactor are associated (or correlated) with IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of Vanguard Multifactor i.e., Vanguard Multifactor and IShares Small go up and down completely randomly.
Pair Corralation between Vanguard Multifactor and IShares Small
Given the investment horizon of 90 days Vanguard Multifactor is expected to generate 1.44 times less return on investment than IShares Small. But when comparing it to its historical volatility, Vanguard Multifactor is 1.49 times less risky than IShares Small. It trades about 0.1 of its potential returns per unit of risk. iShares Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,938 in iShares Small Cap on September 3, 2024 and sell it today you would earn a total of 635.00 from holding iShares Small Cap or generate 21.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Multifactor vs. iShares Small Cap
Performance |
| Timeline |
| Vanguard Multifactor |
| iShares Small Cap |
Vanguard Multifactor and IShares Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Multifactor and IShares Small
The main advantage of trading using opposite Vanguard Multifactor and IShares Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Multifactor position performs unexpectedly, IShares Small 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 Small will offset losses from the drop in IShares Small's long position.| Vanguard Multifactor vs. Vanguard Quality Factor | Vanguard Multifactor vs. Vanguard Momentum Factor | Vanguard Multifactor vs. Vanguard Value Factor | Vanguard Multifactor vs. Vanguard Minimum Volatility |
| IShares Small vs. Horizon Kinetics Inflation | IShares Small vs. Virtus ETF Trust | IShares Small vs. Invesco SP SmallCap | IShares Small vs. iShares MSCI USA |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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