Correlation Between IShares Euro and Vanguard FTSE

Can any of the company-specific risk be diversified away by investing in both IShares Euro 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 Euro 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 Euro Government and Vanguard FTSE North, you can compare the effects of market volatilities on IShares Euro 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 Euro with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Euro and Vanguard FTSE.

Diversification Opportunities for IShares Euro and Vanguard FTSE

-0.52

Correlation Coefficient

IShares Euro  Vanguard FTSE

Excellent diversification

The 3 months correlation between IShares and Vanguard is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares Euro Government and Vanguard FTSE North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE North and IShares Euro 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 Euro Government 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 North has no effect on the direction of IShares Euro i.e., IShares Euro and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares Euro and Vanguard FTSE

Assuming the 90 days trading horizon iShares Euro Government is expected to under-perform the Vanguard FTSE. But the etf apears to be less risky and, when comparing its historical volatility, iShares Euro Government is 2.94 times less risky than Vanguard FTSE. The etf trades about -0.04 of its potential returns per unit of risk. The Vanguard FTSE North is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  11,564  in Vanguard FTSE North on April 23, 2025 and sell it today you would earn a total of  1,641  from holding Vanguard FTSE North or generate 14.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Euro Government  vs.  Vanguard FTSE North

iShares Euro Government

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Euro Government has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Euro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard FTSE North

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE North are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Euro and Vanguard FTSE

The main advantage of trading using opposite IShares Euro and Vanguard FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Euro 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 Euro Government and Vanguard FTSE North 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.