Correlation Between IShares Treasury and Vanguard USD

Can any of the company-specific risk be diversified away by investing in both IShares Treasury and Vanguard USD 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 Vanguard USD 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 Vanguard USD Corporate, you can compare the effects of market volatilities on IShares Treasury and Vanguard USD 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 Vanguard USD. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Treasury and Vanguard USD.

Diversification Opportunities for IShares Treasury and Vanguard USD

-0.66

Correlation Coefficient

IShares Treasury  Vanguard USD

Excellent diversification

The 3 months correlation between IShares and Vanguard is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Treasury Bond and Vanguard USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Corporate 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 Vanguard USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Corporate has no effect on the direction of IShares Treasury i.e., IShares Treasury and Vanguard USD go up and down completely randomly.

Pair Corralation between IShares Treasury and Vanguard USD

Assuming the 90 days trading horizon iShares Treasury Bond is expected to under-perform the Vanguard USD. In addition to that, IShares Treasury is 2.1 times more volatile than Vanguard USD Corporate. It trades about -0.12 of its total potential returns per unit of risk. Vanguard USD Corporate is currently generating about 0.13 per unit of volatility. If you would invest  4,376  in Vanguard USD Corporate on September 13, 2024 and sell it today you would earn a total of  157.00  from holding Vanguard USD Corporate or generate 3.59% return on investment over 90 days.

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

iShares Treasury Bond  vs.  Vanguard USD Corporate

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 latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Vanguard USD Corporate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard USD Corporate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vanguard USD is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Treasury and Vanguard USD

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

The idea behind iShares Treasury Bond and Vanguard USD Corporate 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.