Correlation Between IShares Core and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both IShares Core and Vanguard Total 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 IShares Core and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and Vanguard Total Market, you can compare the effects of market volatilities on IShares Core and Vanguard Total 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 IShares Core with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard Total.
Diversification Opportunities for IShares Core and Vanguard Total
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Vanguard is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Vanguard Total Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Market and IShares Core 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 iShares Core MSCI are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Market has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Total go up and down completely randomly.
Pair Corralation between IShares Core and Vanguard Total
Assuming the 90 days trading horizon iShares Core MSCI is expected to under-perform the Vanguard Total. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core MSCI is 1.12 times less risky than Vanguard Total. The etf trades about -0.05 of its potential returns per unit of risk. The Vanguard Total Market is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 10,121 in Vanguard Total Market on August 25, 2024 and sell it today you would earn a total of 1,155 from holding Vanguard Total Market or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. Vanguard Total Market
Performance |
| Timeline |
| iShares Core MSCI |
| Vanguard Total Market |
IShares Core and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Vanguard Total
The main advantage of trading using opposite IShares Core and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total's long position.| IShares Core vs. Vanguard FTSE Developed | IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares Core MSCI | IShares Core vs. BMO MSCI EAFE |
| Vanguard Total vs. Vanguard FTSE Canada | Vanguard Total vs. Vanguard FTSE Emerging | Vanguard Total vs. iShares Core MSCI | Vanguard Total vs. Vanguard Canadian Aggregate |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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