Correlation Between IShares Core and Vanguard All
Can any of the company-specific risk be diversified away by investing in both IShares Core and Vanguard All 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 All into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core Growth and Vanguard All Equity ETF, you can compare the effects of market volatilities on IShares Core and Vanguard All 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 All. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard All.
Diversification Opportunities for IShares Core and Vanguard All
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Growth and Vanguard All Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard All Equity 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 Growth are associated (or correlated) with Vanguard All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard All Equity has no effect on the direction of IShares Core i.e., IShares Core and Vanguard All go up and down completely randomly.
Pair Corralation between IShares Core and Vanguard All
Assuming the 90 days trading horizon IShares Core is expected to generate 1.18 times less return on investment than Vanguard All. But when comparing it to its historical volatility, iShares Core Growth is 1.17 times less risky than Vanguard All. It trades about 0.21 of its potential returns per unit of risk. Vanguard All Equity ETF is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,324 in Vanguard All Equity ETF on August 25, 2024 and sell it today you would earn a total of 1,273 from holding Vanguard All Equity ETF or generate 38.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core Growth vs. Vanguard All Equity ETF
Performance |
| Timeline |
| iShares Core Growth |
| Vanguard All Equity |
IShares Core and Vanguard All Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Vanguard All
The main advantage of trading using opposite IShares Core and Vanguard All positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Vanguard All 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 All will offset losses from the drop in Vanguard All's long position.| IShares Core vs. iShares Core Balanced | IShares Core vs. Vanguard Growth Portfolio | IShares Core vs. iShares Core Equity | IShares Core vs. Vanguard All Equity ETF |
| Vanguard All vs. Vanguard FTSE Canada | Vanguard All vs. Vanguard Canadian Aggregate | Vanguard All vs. Vanguard Total Market | Vanguard All vs. Vanguard FTSE Emerging |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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