Correlation Between IShares Trust and Vanguard Short

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

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

Diversification Opportunities for IShares Trust and Vanguard Short

0.09

Correlation Coefficient

IShares Trust  Vanguard Short

Significant diversification

The 3 months correlation between IShares and Vanguard is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Vanguard Short Term Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and IShares Trust 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 Trust are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of IShares Trust i.e., IShares Trust and Vanguard Short go up and down completely randomly.

Pair Corralation between IShares Trust and Vanguard Short

Given the investment horizon of 90 days iShares Trust is expected to generate 0.46 times more return on investment than Vanguard Short. However, iShares Trust is 2.17 times less risky than Vanguard Short. It trades about 0.46 of its potential returns per unit of risk. Vanguard Short Term Inflation Protected is currently generating about 0.03 per unit of risk. If you would invest  2,514  in iShares Trust on September 15, 2024 and sell it today you would earn a total of  36.00  from holding iShares Trust or generate 1.43% return on investment over 90 days.

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

iShares Trust  vs.  Vanguard Short Term Inflation

iShares Trust

Risk-Adjusted Performance

35 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 35 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, IShares Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Short Term

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Inflation Protected are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Vanguard Short is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Trust and Vanguard Short

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

The idea behind iShares Trust and Vanguard Short Term Inflation Protected 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.