Correlation Between Vanguard Index and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Index and IShares Trust 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 Index and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Index Funds and iShares Trust , you can compare the effects of market volatilities on Vanguard Index and IShares Trust 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 Index with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Index and IShares Trust.
Diversification Opportunities for Vanguard Index and IShares Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Index Funds and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Vanguard Index 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 Index Funds are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Vanguard Index i.e., Vanguard Index and IShares Trust go up and down completely randomly.
Pair Corralation between Vanguard Index and IShares Trust
Assuming the 90 days trading horizon Vanguard Index is expected to generate 2.88 times less return on investment than IShares Trust. But when comparing it to its historical volatility, Vanguard Index Funds is 2.23 times less risky than IShares Trust. It trades about 0.2 of its potential returns per unit of risk. iShares Trust is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 316,294 in iShares Trust on August 24, 2024 and sell it today you would earn a total of 52,029 from holding iShares Trust or generate 16.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Index Funds vs. iShares Trust
Performance |
| Timeline |
| Vanguard Index Funds |
| iShares Trust |
Vanguard Index and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Index and IShares Trust
The main advantage of trading using opposite Vanguard Index and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Index position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust's long position.| Vanguard Index vs. Vanguard Funds Public | Vanguard Index vs. Vanguard Specialized Funds | Vanguard Index vs. Vanguard World | Vanguard Index vs. Vanguard Index Funds |
| IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard STAR Funds | IShares Trust vs. SPDR SP 500 |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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