Correlation Between Vanguard Utilities and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both Vanguard Utilities and IShares Consumer 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 Utilities and IShares Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Utilities Index and iShares Consumer Staples, you can compare the effects of market volatilities on Vanguard Utilities and IShares Consumer 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 Utilities with a short position of IShares Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Utilities and IShares Consumer.
Diversification Opportunities for Vanguard Utilities and IShares Consumer
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and IShares is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Utilities Index and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples and Vanguard Utilities 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 Utilities Index are associated (or correlated) with IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of Vanguard Utilities i.e., Vanguard Utilities and IShares Consumer go up and down completely randomly.
Pair Corralation between Vanguard Utilities and IShares Consumer
Considering the 90-day investment horizon Vanguard Utilities Index is expected to generate 1.5 times more return on investment than IShares Consumer. However, Vanguard Utilities is 1.5 times more volatile than iShares Consumer Staples. It trades about 0.17 of its potential returns per unit of risk. iShares Consumer Staples is currently generating about 0.05 per unit of risk. If you would invest 15,434 in Vanguard Utilities Index on August 27, 2024 and sell it today you would earn a total of 2,171 from holding Vanguard Utilities Index or generate 14.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Utilities Index vs. iShares Consumer Staples
Performance |
| Timeline |
| Vanguard Utilities Index |
| iShares Consumer Staples |
Vanguard Utilities and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Utilities and IShares Consumer
The main advantage of trading using opposite Vanguard Utilities and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Utilities position performs unexpectedly, IShares Consumer 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 Consumer will offset losses from the drop in IShares Consumer's long position.| Vanguard Utilities vs. Vanguard Consumer Staples | Vanguard Utilities vs. Vanguard Materials Index | Vanguard Utilities vs. Vanguard Communication Services | Vanguard Utilities vs. Vanguard Financials Index |
| IShares Consumer vs. Vanguard Consumer Discretionary | IShares Consumer vs. Vanguard Utilities Index | IShares Consumer vs. Vanguard Industrials Index | IShares Consumer vs. Vanguard Materials Index |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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