Correlation Between IShares ESG and Vanguard Large

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

By analyzing existing cross correlation between iShares ESG Aware and Vanguard Large Cap Index, you can compare the effects of market volatilities on IShares ESG and Vanguard Large 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 ESG with a short position of Vanguard Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Vanguard Large.

Diversification Opportunities for IShares ESG and Vanguard Large

0.9

Correlation Coefficient

IShares ESG  Vanguard Large

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap and IShares ESG 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 ESG Aware are associated (or correlated) with Vanguard Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of IShares ESG i.e., IShares ESG and Vanguard Large go up and down completely randomly.

Pair Corralation between IShares ESG and Vanguard Large

Given the investment horizon of 90 days IShares ESG is expected to generate 1.1 times less return on investment than Vanguard Large. In addition to that, IShares ESG is 1.02 times more volatile than Vanguard Large Cap Index. It trades about 0.24 of its total potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.26 per unit of volatility. If you would invest  25,646  in Vanguard Large Cap Index on May 6, 2025 and sell it today you would earn a total of  3,375  from holding Vanguard Large Cap Index or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

iShares ESG Aware  vs.  Vanguard Large Cap Index

iShares ESG Aware

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Vanguard Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard Large may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with IShares ESG and Vanguard Large

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

The idea behind iShares ESG Aware and Vanguard Large Cap Index 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.