Correlation Between IShares Intermediate and Vanguard Intermediate

Can any of the company-specific risk be diversified away by investing in both IShares Intermediate 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 Intermediate 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 Intermediate GovernmentCredit and Vanguard Intermediate Term Bond, you can compare the effects of market volatilities on IShares Intermediate 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 Intermediate with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Intermediate and Vanguard Intermediate.

Diversification Opportunities for IShares Intermediate and Vanguard Intermediate

0.99

Correlation Coefficient

IShares Intermediate  Vanguard Intermediate

No risk reduction

The 3 months correlation between IShares and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intermediate Governmen and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and IShares Intermediate 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 Intermediate GovernmentCredit 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 Intermediate i.e., IShares Intermediate and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between IShares Intermediate and Vanguard Intermediate

Considering the 90-day investment horizon iShares Intermediate GovernmentCredit is expected to generate 0.62 times more return on investment than Vanguard Intermediate. However, iShares Intermediate GovernmentCredit is 1.61 times less risky than Vanguard Intermediate. It trades about 0.05 of its potential returns per unit of risk. Vanguard Intermediate Term Bond is currently generating about 0.02 per unit of risk. If you would invest  9,762  in iShares Intermediate GovernmentCredit on September 30, 2024 and sell it today you would earn a total of  634.00  from holding iShares Intermediate GovernmentCredit or generate 6.49% return on investment over 90 days.

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

iShares Intermediate Governmen  vs.  Vanguard Intermediate Term Bon

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Intermediate and Vanguard Intermediate

The main advantage of trading using opposite IShares Intermediate and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Intermediate 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 Intermediate GovernmentCredit and Vanguard Intermediate Term 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.