Correlation Between Vanguard Value and IShares ESG
Can any of the company-specific risk be diversified away by investing in both Vanguard Value and IShares ESG 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 ESG 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 ESG Screened, you can compare the effects of market volatilities on Vanguard Value and IShares ESG 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 ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and IShares ESG.
Diversification Opportunities for Vanguard Value and IShares ESG
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of Vanguard Value i.e., Vanguard Value and IShares ESG go up and down completely randomly.
Pair Corralation between Vanguard Value and IShares ESG
Considering the 90-day investment horizon Vanguard Value Index is expected to generate 0.54 times more return on investment than IShares ESG. However, Vanguard Value Index is 1.84 times less risky than IShares ESG. It trades about 0.09 of its potential returns per unit of risk. iShares ESG Screened is currently generating about 0.04 per unit of risk. If you would invest 13,284 in Vanguard Value Index on November 19, 2024 and sell it today you would earn a total of 4,453 from holding Vanguard Value Index or generate 33.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Value Index vs. iShares ESG Screened
Performance |
| Timeline |
| Vanguard Value Index |
| iShares ESG Screened |
Vanguard Value and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and IShares ESG
The main advantage of trading using opposite Vanguard Value and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG'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 ESG vs. iShares ESG Screened | IShares ESG vs. iShares ESG Screened | IShares ESG vs. iShares ESG Advanced | IShares ESG vs. iShares ESG Advanced |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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