Correlation Between Vanguard and IShares STOXX
Can any of the company-specific risk be diversified away by investing in both Vanguard and IShares STOXX 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 STOXX 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 STOXX Europe, you can compare the effects of market volatilities on Vanguard and IShares STOXX 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 STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and IShares STOXX.
Diversification Opportunities for Vanguard and IShares STOXX
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and IShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares STOXX Europe 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 STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares STOXX Europe has no effect on the direction of Vanguard i.e., Vanguard and IShares STOXX go up and down completely randomly.
Pair Corralation between Vanguard and IShares STOXX
Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 0.56 times more return on investment than IShares STOXX. However, Vanguard SP 500 is 1.79 times less risky than IShares STOXX. It trades about 0.3 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about -0.1 per unit of risk. If you would invest 9,762 in Vanguard SP 500 on August 28, 2024 and sell it today you would earn a total of 1,126 from holding Vanguard SP 500 or generate 11.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard SP 500 vs. iShares STOXX Europe
Performance |
| Timeline |
| Vanguard SP 500 |
| iShares STOXX Europe |
Vanguard and IShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard and IShares STOXX
The main advantage of trading using opposite Vanguard and IShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard position performs unexpectedly, IShares STOXX 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 STOXX will offset losses from the drop in IShares STOXX'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 STOXX vs. Vanguard SP 500 | IShares STOXX vs. SPDR Dow Jones | IShares STOXX vs. iShares Core MSCI | IShares STOXX vs. iShares SP 500 |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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