Correlation Between IShares Global and Vanguard FTSE

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

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

Diversification Opportunities for IShares Global and Vanguard FTSE

0.72

Correlation Coefficient

IShares Global  Vanguard FTSE

Poor diversification

The 3 months correlation between IShares and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Real and Vanguard FTSE Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Canadian and IShares Global 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 Global Real are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Canadian has no effect on the direction of IShares Global i.e., IShares Global and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares Global and Vanguard FTSE

Assuming the 90 days trading horizon IShares Global is expected to generate 2.5 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, iShares Global Real is 1.0 times less risky than Vanguard FTSE. It trades about 0.09 of its potential returns per unit of risk. Vanguard FTSE Canadian is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,964  in Vanguard FTSE Canadian on April 23, 2025 and sell it today you would earn a total of  327.00  from holding Vanguard FTSE Canadian or generate 11.03% return on investment over 90 days.

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

iShares Global Real  vs.  Vanguard FTSE Canadian

iShares Global Real

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Real are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vanguard FTSE Canadian

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Canadian are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares Global and Vanguard FTSE

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

The idea behind iShares Global Real and Vanguard FTSE Canadian 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.