Correlation Between IShares Treasury and Vident Core

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

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

Diversification Opportunities for IShares Treasury and Vident Core

0.96

Correlation Coefficient

IShares Treasury  Vident Core

Almost no diversification

The 3 months correlation between IShares and Vident is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and Vident Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Bond and IShares Treasury 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 Treasury Bond are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Bond has no effect on the direction of IShares Treasury i.e., IShares Treasury and Vident Core go up and down completely randomly.

Pair Corralation between IShares Treasury and Vident Core

Given the investment horizon of 90 days IShares Treasury is expected to generate 1.03 times less return on investment than Vident Core. But when comparing it to its historical volatility, iShares Treasury Bond is 1.18 times less risky than Vident Core. It trades about 0.12 of its potential returns per unit of risk. Vident Core Bond is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,352  in Vident Core Bond on September 5, 2024 and sell it today you would earn a total of  39.00  from holding Vident Core Bond or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

iShares Treasury Bond  vs.  Vident Core Bond

iShares Treasury Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vident Core Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vident Core Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Treasury and Vident Core

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

The idea behind iShares Treasury Bond and Vident Core Bond 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.