Correlation Between Vanguard FTSE and IShares Core

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

Diversification Opportunities for Vanguard FTSE and IShares Core

0.83

Correlation Coefficient

Vanguard FTSE  IShares Core

Very poor diversification

The 3 months correlation between Vanguard and IShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and iShares Core FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core FTSE and Vanguard FTSE 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 FTSE Emerging 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 FTSE has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares Core

Assuming the 90 days trading horizon Vanguard FTSE Emerging is expected to generate 1.64 times more return on investment than IShares Core. However, Vanguard FTSE is 1.64 times more volatile than iShares Core FTSE. It trades about 0.17 of its potential returns per unit of risk. iShares Core FTSE is currently generating about 0.21 per unit of risk. If you would invest  5,426  in Vanguard FTSE Emerging on April 24, 2025 and sell it today you would earn a total of  504.00  from holding Vanguard FTSE Emerging or generate 9.29% return on investment over 90 days.

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

Vanguard FTSE Emerging  vs.  iShares Core FTSE

Vanguard FTSE Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

iShares Core FTSE

Risk-Adjusted Performance

Good

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

Pair Trading with Vanguard FTSE and IShares Core

The main advantage of trading using opposite Vanguard FTSE and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE Emerging and iShares Core FTSE 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..