Correlation Between Vanguard Extended and IShares 1

Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and IShares 1 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 Extended and IShares 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Extended Duration and iShares 1 3 Year, you can compare the effects of market volatilities on Vanguard Extended and IShares 1 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 Extended with a short position of IShares 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and IShares 1.

Diversification Opportunities for Vanguard Extended and IShares 1

0.7

Correlation Coefficient

Vanguard Extended  IShares 1

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Duration and iShares 1 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 1 3 and Vanguard Extended 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 Extended Duration are associated (or correlated) with IShares 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares 1 3 has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and IShares 1 go up and down completely randomly.

Pair Corralation between Vanguard Extended and IShares 1

Considering the 90-day investment horizon Vanguard Extended Duration is expected to under-perform the IShares 1. In addition to that, Vanguard Extended is 15.86 times more volatile than iShares 1 3 Year. It trades about -0.26 of its total potential returns per unit of risk. iShares 1 3 Year is currently generating about 0.12 per unit of volatility. If you would invest  8,163  in iShares 1 3 Year on September 27, 2024 and sell it today you would earn a total of  14.00  from holding iShares 1 3 Year or generate 0.17% return on investment over 90 days.

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

Vanguard Extended Duration  vs.  iShares 1 3 Year

Vanguard Extended

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Extended Duration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

iShares 1 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 1 3 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Extended and IShares 1

The main advantage of trading using opposite Vanguard Extended and IShares 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, IShares 1 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 1 will offset losses from the drop in IShares 1's long position.

The idea behind Vanguard Extended Duration and iShares 1 3 Year 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.