Correlation Between IShares Agency and Vanguard Intermediate

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

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

Diversification Opportunities for IShares Agency and Vanguard Intermediate

0.89

Correlation Coefficient

IShares Agency  Vanguard Intermediate

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Agency Bond and Vanguard Intermediate Term Tre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and IShares Agency 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 Agency Bond are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of IShares Agency i.e., IShares Agency and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between IShares Agency and Vanguard Intermediate

Considering the 90-day investment horizon iShares Agency Bond is expected to generate 0.58 times more return on investment than Vanguard Intermediate. However, iShares Agency Bond is 1.73 times less risky than Vanguard Intermediate. It trades about 0.17 of its potential returns per unit of risk. Vanguard Intermediate Term Treasury is currently generating about 0.06 per unit of risk. If you would invest  10,768  in iShares Agency Bond on October 20, 2024 and sell it today you would earn a total of  58.00  from holding iShares Agency Bond or generate 0.54% return on investment over 90 days.

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

iShares Agency Bond  vs.  Vanguard Intermediate Term Tre

iShares Agency Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Agency Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, IShares Agency is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Agency and Vanguard Intermediate

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

The idea behind iShares Agency Bond and Vanguard Intermediate Term Treasury 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.