Correlation Between Vanguard and IShares China
Can any of the company-specific risk be diversified away by investing in both Vanguard and IShares China 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 China 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 China CNY, you can compare the effects of market volatilities on Vanguard and IShares China 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 China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and IShares China.
Diversification Opportunities for Vanguard and IShares China
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares China CNY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China CNY 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 China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares China CNY has no effect on the direction of Vanguard i.e., Vanguard and IShares China go up and down completely randomly.
Pair Corralation between Vanguard and IShares China
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 7.19 times more return on investment than IShares China. However, Vanguard is 7.19 times more volatile than iShares China CNY. It trades about 0.21 of its potential returns per unit of risk. iShares China CNY is currently generating about 0.29 per unit of risk. If you would invest 10,236 in Vanguard SP 500 on August 30, 2024 and sell it today you would earn a total of 589.00 from holding Vanguard SP 500 or generate 5.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. iShares China CNY
Performance |
| Timeline |
| Vanguard SP 500 |
| iShares China CNY |
Vanguard and IShares China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and IShares China
The main advantage of trading using opposite Vanguard and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, IShares China 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 China will offset losses from the drop in IShares China's long position.| Vanguard vs. Vanguard FTSE All World | Vanguard vs. iShares Core MSCI | Vanguard vs. Vanguard FTSE All World | Vanguard vs. Vanguard FTSE Emerging |
| IShares China vs. iShares III Public | IShares China vs. iShares Core MSCI | IShares China vs. iShares France Govt | IShares China vs. iShares Edge MSCI |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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