Correlation Between Vanguard Long and IShares Intermediate

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

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

Diversification Opportunities for Vanguard Long and IShares Intermediate

0.95

Correlation Coefficient

Vanguard Long  IShares Intermediate

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Bond and iShares Intermediate Governmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Intermediate and Vanguard Long 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 Long Term Bond are associated (or correlated) with IShares Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Intermediate has no effect on the direction of Vanguard Long i.e., Vanguard Long and IShares Intermediate go up and down completely randomly.

Pair Corralation between Vanguard Long and IShares Intermediate

Considering the 90-day investment horizon Vanguard Long is expected to generate 1.14 times less return on investment than IShares Intermediate. In addition to that, Vanguard Long is 3.53 times more volatile than iShares Intermediate GovernmentCredit. It trades about 0.03 of its total potential returns per unit of risk. iShares Intermediate GovernmentCredit is currently generating about 0.12 per unit of volatility. If you would invest  10,225  in iShares Intermediate GovernmentCredit on September 12, 2024 and sell it today you would earn a total of  307.00  from holding iShares Intermediate GovernmentCredit or generate 3.0% return on investment over 90 days.

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

Vanguard Long Term Bond  vs.  iShares Intermediate Governmen

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Long Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Vanguard Long is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Intermediate GovernmentCredit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Intermediate is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Long and IShares Intermediate

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

The idea behind Vanguard Long Term Bond and iShares Intermediate GovernmentCredit 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.