Correlation Between Vanguard Funds and IShares STOXX
Can any of the company-specific risk be diversified away by investing in both Vanguard Funds 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 Funds 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 Funds Public and iShares STOXX Europe, you can compare the effects of market volatilities on Vanguard Funds 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 Funds with a short position of IShares STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Funds and IShares STOXX.
Diversification Opportunities for Vanguard Funds and IShares STOXX
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Funds Public 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 Funds 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 Funds Public 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 Funds i.e., Vanguard Funds and IShares STOXX go up and down completely randomly.
Pair Corralation between Vanguard Funds and IShares STOXX
Assuming the 90 days trading horizon Vanguard Funds Public is expected to generate 0.92 times more return on investment than IShares STOXX. However, Vanguard Funds Public is 1.08 times less risky than IShares STOXX. It trades about 0.22 of its potential returns per unit of risk. iShares STOXX Europe is currently generating about 0.07 per unit of risk. If you would invest 9,542 in Vanguard Funds Public on August 28, 2024 and sell it today you would earn a total of 1,275 from holding Vanguard Funds Public or generate 13.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Funds Public vs. iShares STOXX Europe
Performance |
| Timeline |
| Vanguard Funds Public |
| iShares STOXX Europe |
Vanguard Funds and IShares STOXX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Funds and IShares STOXX
The main advantage of trading using opposite Vanguard Funds and IShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Funds 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 Funds vs. Vanguard ESG Developed | Vanguard Funds vs. Vanguard Funds Public | Vanguard Funds vs. Vanguard Funds PLC | Vanguard Funds vs. Vanguard Funds Public |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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