Correlation Between IShares NASDAQ and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ 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 NASDAQ 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 NASDAQ 100 and Vanguard Total Market, you can compare the effects of market volatilities on IShares NASDAQ 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 NASDAQ with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and Vanguard Total.
Diversification Opportunities for IShares NASDAQ and Vanguard Total
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 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 NASDAQ 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 NASDAQ 100 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 NASDAQ i.e., IShares NASDAQ and Vanguard Total go up and down completely randomly.
Pair Corralation between IShares NASDAQ and Vanguard Total
Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.51 times more return on investment than Vanguard Total. However, IShares NASDAQ is 1.51 times more volatile than Vanguard Total Market. It trades about 0.18 of its potential returns per unit of risk. Vanguard Total Market is currently generating about 0.16 per unit of risk. If you would invest 5,232 in iShares NASDAQ 100 on September 26, 2024 and sell it today you would earn a total of 248.00 from holding iShares NASDAQ 100 or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares NASDAQ 100 vs. Vanguard Total Market
Performance |
| Timeline |
| iShares NASDAQ 100 |
| Vanguard Total Market |
IShares NASDAQ and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares NASDAQ and Vanguard Total
The main advantage of trading using opposite IShares NASDAQ and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ 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 NASDAQ vs. iShares Core SP | IShares NASDAQ vs. iShares SPTSX Capped | IShares NASDAQ vs. BMO NASDAQ 100 | IShares NASDAQ vs. Vanguard SP 500 |
| Vanguard Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard FTSE Canadian | Vanguard Total vs. iShares NASDAQ 100 | Vanguard Total vs. Vanguard Total Market |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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