Correlation Between Vanguard and IShares Thematic
Can any of the company-specific risk be diversified away by investing in both Vanguard and IShares Thematic 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 and IShares Thematic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard SP 500 and iShares Thematic Rotation, you can compare the effects of market volatilities on Vanguard and IShares Thematic 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 with a short position of IShares Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and IShares Thematic.
Diversification Opportunities for Vanguard and IShares Thematic
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares Thematic Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Thematic Rotation and Vanguard 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 SP 500 are associated (or correlated) with IShares Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Thematic Rotation has no effect on the direction of Vanguard i.e., Vanguard and IShares Thematic go up and down completely randomly.
Pair Corralation between Vanguard and IShares Thematic
Considering the 90-day investment horizon Vanguard is expected to generate 1.2 times less return on investment than IShares Thematic. But when comparing it to its historical volatility, Vanguard SP 500 is 1.14 times less risky than IShares Thematic. It trades about 0.2 of its potential returns per unit of risk. iShares Thematic Rotation is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,184 in iShares Thematic Rotation on September 13, 2024 and sell it today you would earn a total of 324.00 from holding iShares Thematic Rotation or generate 10.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. iShares Thematic Rotation
Performance |
| Timeline |
| Vanguard SP 500 |
| iShares Thematic Rotation |
Vanguard and IShares Thematic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and IShares Thematic
The main advantage of trading using opposite Vanguard and IShares Thematic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, IShares Thematic 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 Thematic will offset losses from the drop in IShares Thematic's long position.| Vanguard vs. Vanguard Total Stock | Vanguard vs. Vanguard High Dividend | Vanguard vs. Vanguard Information Technology | Vanguard vs. Invesco QQQ Trust |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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