Correlation Between Vanguard Intermediate and IShares National

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

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

Diversification Opportunities for Vanguard Intermediate and IShares National

0.63

Correlation Coefficient

Vanguard Intermediate  IShares National

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Cor and iShares National Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares National Muni and Vanguard 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 Vanguard Intermediate Term Corporate are associated (or correlated) with IShares National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares National Muni has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and IShares National go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and IShares National

Given the investment horizon of 90 days Vanguard Intermediate Term Corporate is expected to under-perform the IShares National. In addition to that, Vanguard Intermediate is 1.12 times more volatile than iShares National Muni. It trades about -0.09 of its total potential returns per unit of risk. iShares National Muni is currently generating about -0.01 per unit of volatility. If you would invest  10,781  in iShares National Muni on September 14, 2024 and sell it today you would lose (20.00) from holding iShares National Muni or give up 0.19% of portfolio value over 90 days.

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

Vanguard Intermediate Term Cor  vs.  iShares National Muni

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares National Muni

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares National Muni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares National 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 Intermediate and IShares National

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

The idea behind Vanguard Intermediate Term Corporate and iShares National Muni 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 Anywhere module to track or share privately all of your investments from the convenience of any device.