Correlation Between IShares Russell and Vanguard High

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Can any of the company-specific risk be diversified away by investing in both IShares Russell and Vanguard High 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 Russell and Vanguard High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares Russell 1000 and Vanguard High Dividend, you can compare the effects of market volatilities on IShares Russell and Vanguard High 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 Russell with a short position of Vanguard High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Vanguard High.

Diversification Opportunities for IShares Russell and Vanguard High

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between IShares and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding IShares Russell 1000 and Vanguard High Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Dividend and IShares Russell 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 Russell 1000 are associated (or correlated) with Vanguard High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Dividend has no effect on the direction of IShares Russell i.e., IShares Russell and Vanguard High go up and down completely randomly.

Pair Corralation between IShares Russell and Vanguard High

Considering the 90-day investment horizon IShares Russell 1000 is expected to generate about the same return on investment as Vanguard High Dividend. However, IShares Russell is 1.07 times more volatile than Vanguard High Dividend. It trades about 0.21 of its potential returns per unit of risk. Vanguard High Dividend is currently producing about 0.23 per unit of risk. If you would invest  10,051  in Vanguard High Dividend on December 29, 2023 and sell it today you would earn a total of  2,049  from holding Vanguard High Dividend or generate 20.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.19%
ValuesDaily Returns

IShares Russell 1000  vs.  Vanguard High Dividend

 Performance 
       Timeline  
IShares Russell 1000 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Russell 1000 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Vanguard High Dividend 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Dividend are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard High may actually be approaching a critical reversion point that can send shares even higher in April 2024.

IShares Russell and Vanguard High Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Russell and Vanguard High

The main advantage of trading using opposite IShares Russell and Vanguard High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell position performs unexpectedly, Vanguard High 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 High will offset losses from the drop in Vanguard High's long position.
The idea behind IShares Russell 1000 and Vanguard High Dividend pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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