Correlation Between IShares Core and Vanguard Minimum

Can any of the company-specific risk be diversified away by investing in both IShares Core and Vanguard Minimum 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 Minimum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Core SP and Vanguard Minimum Volatility, you can compare the effects of market volatilities on IShares Core and Vanguard Minimum 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 Minimum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard Minimum.

Diversification Opportunities for IShares Core and Vanguard Minimum

0.93

Correlation Coefficient

IShares Core  Vanguard Minimum

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Vanguard Minimum Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Minimum Vol 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 SP are associated (or correlated) with Vanguard Minimum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Minimum Vol has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Minimum go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard Minimum

Considering the 90-day investment horizon iShares Core SP is expected to under-perform the Vanguard Minimum. In addition to that, IShares Core is 1.61 times more volatile than Vanguard Minimum Volatility. It trades about -0.28 of its total potential returns per unit of risk. Vanguard Minimum Volatility is currently generating about -0.21 per unit of volatility. If you would invest  11,189  in Vanguard Minimum Volatility on January 28, 2024 and sell it today you would lose (256.00) from holding Vanguard Minimum Volatility or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

iShares Core SP  vs.  Vanguard Minimum Volatility

iShares Core SP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, IShares Core is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Vanguard Minimum Vol

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Minimum Volatility are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vanguard Minimum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Core and Vanguard Minimum

The main advantage of trading using opposite IShares Core and Vanguard Minimum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, Vanguard Minimum 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 Minimum will offset losses from the drop in Vanguard Minimum's long position.

The idea behind iShares Core SP and Vanguard Minimum Volatility 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.