Correlation Between IShares Core and Vanguard Balanced

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

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

Diversification Opportunities for IShares Core and Vanguard Balanced

1.0

Correlation Coefficient

IShares Core  Vanguard Balanced

No risk reduction

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

Pair Corralation between IShares Core and Vanguard Balanced

Assuming the 90 days trading horizon iShares Core Equity is expected to generate 1.59 times more return on investment than Vanguard Balanced. However, IShares Core is 1.59 times more volatile than Vanguard Balanced Portfolio. It trades about 0.37 of its potential returns per unit of risk. Vanguard Balanced Portfolio is currently generating about 0.36 per unit of risk. If you would invest  3,088  in iShares Core Equity on April 20, 2025 and sell it today you would earn a total of  515.00  from holding iShares Core Equity or generate 16.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

iShares Core Equity  vs.  Vanguard Balanced Portfolio

iShares Core Equity

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core Equity are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares Core displayed solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Balanced

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Balanced Portfolio are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vanguard Balanced may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares Core and Vanguard Balanced

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

The idea behind iShares Core Equity and Vanguard Balanced Portfolio 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.