Correlation Between Vanguard Value and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and iShares Trust, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and IShares Trust.
Diversification Opportunities for Vanguard Value and IShares Trust
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Vanguard Value 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 Value Index 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 Value i.e., Vanguard Value and IShares Trust go up and down completely randomly.
Pair Corralation between Vanguard Value and IShares Trust
Considering the 90-day investment horizon Vanguard Value is expected to generate 1.95 times less return on investment than IShares Trust. But when comparing it to its historical volatility, Vanguard Value Index is 1.07 times less risky than IShares Trust. It trades about 0.08 of its potential returns per unit of risk. iShares Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,421 in iShares Trust on September 13, 2024 and sell it today you would earn a total of 891.00 from holding iShares Trust or generate 36.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 58.7% |
| Values | Daily Returns |
Vanguard Value Index vs. iShares Trust
Performance |
| Timeline |
| Vanguard Value Index |
| iShares Trust |
Vanguard Value and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and IShares Trust
The main advantage of trading using opposite Vanguard Value and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
| IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. EA Series Trust | IShares Trust vs. Aptus Defined Risk |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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