Correlation Between Vanguard Balanced and IShares Core

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

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

Diversification Opportunities for Vanguard Balanced and IShares Core

1.0

Correlation Coefficient

Vanguard Balanced  IShares Core

No risk reduction

The 3 months correlation between Vanguard and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Balanced Portfolio and iShares Core Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Equity and Vanguard Balanced 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 Vanguard Balanced Portfolio are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Equity has no effect on the direction of Vanguard Balanced i.e., Vanguard Balanced and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Balanced and IShares Core

Assuming the 90 days trading horizon Vanguard Balanced is expected to generate 1.6 times less return on investment than IShares Core. But when comparing it to its historical volatility, Vanguard Balanced Portfolio is 1.63 times less risky than IShares Core. It trades about 0.02 of its potential returns per unit of risk. iShares Core Equity is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,434  in iShares Core Equity on March 24, 2025 and sell it today you would earn a total of  50.00  from holding iShares Core Equity or generate 1.46% return on investment over 90 days.

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

Vanguard Balanced Portfolio  vs.  iShares Core Equity

Vanguard Balanced

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Portfolio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Balanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Core Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Equity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Balanced and IShares Core

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

The idea behind Vanguard Balanced Portfolio and iShares Core Equity 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.