Correlation Between Vanguard and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 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 SP 500 and iShares Trust, you can compare the effects of market volatilities on Vanguard 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 with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and IShares Trust.
Diversification Opportunities for Vanguard and IShares Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 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 i.e., Vanguard and IShares Trust go up and down completely randomly.
Pair Corralation between Vanguard and IShares Trust
Given the investment horizon of 90 days Vanguard SP 500 is expected to generate 1.28 times more return on investment than IShares Trust. However, Vanguard is 1.28 times more volatile than iShares Trust. It trades about 0.06 of its potential returns per unit of risk. iShares Trust is currently generating about 0.06 per unit of risk. If you would invest 22,846 in Vanguard SP 500 on January 11, 2025 and sell it today you would earn a total of 9,135 from holding Vanguard SP 500 or generate 39.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 74.75% |
| Values | Daily Returns |
Vanguard SP 500 vs. iShares Trust
Performance |
| Timeline |
| Vanguard SP 500 |
| iShares Trust |
Vanguard and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and IShares Trust
The main advantage of trading using opposite Vanguard and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 vs. Invesco NASDAQ Next | Vanguard vs. SPDR Portfolio SP | Vanguard vs. SPDR Portfolio SP | Vanguard vs. Schwab Dividend Equity |
| IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. Akros Monthly Payout | IShares Trust vs. Northern Lights |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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