Correlation Between Vanguard Long and US Treasury
Can any of the company-specific risk be diversified away by investing in both Vanguard Long and US Treasury 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 Long and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Long Term Corporate and US Treasury 20, you can compare the effects of market volatilities on Vanguard Long and US Treasury 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 Long with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long and US Treasury.
Diversification Opportunities for Vanguard Long and US Treasury
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and UTWY is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Corporate and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 and Vanguard Long 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 Long Term Corporate are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 20 has no effect on the direction of Vanguard Long i.e., Vanguard Long and US Treasury go up and down completely randomly.
Pair Corralation between Vanguard Long and US Treasury
Given the investment horizon of 90 days Vanguard Long Term Corporate is expected to generate 1.01 times more return on investment than US Treasury. However, Vanguard Long is 1.01 times more volatile than US Treasury 20. It trades about -0.11 of its potential returns per unit of risk. US Treasury 20 is currently generating about -0.19 per unit of risk. If you would invest 8,118 in Vanguard Long Term Corporate on September 14, 2024 and sell it today you would lose (370.00) from holding Vanguard Long Term Corporate or give up 4.56% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.44% |
Values | Daily Returns |
Vanguard Long Term Corporate vs. US Treasury 20
Performance |
Timeline |
Vanguard Long Term |
US Treasury 20 |
Vanguard Long and US Treasury Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vanguard Long and US Treasury
The main advantage of trading using opposite Vanguard Long and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long position performs unexpectedly, US Treasury 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 US Treasury will offset losses from the drop in US Treasury's long position.Vanguard Long vs. Vanguard Intermediate Term Corporate | Vanguard Long vs. Vanguard Long Term Treasury | Vanguard Long vs. Vanguard Long Term Bond | Vanguard Long vs. Vanguard Short Term Corporate |
US Treasury vs. Vanguard Long Term Treasury | US Treasury vs. Vanguard Long Term Corporate | US Treasury vs. Vanguard Long Term Bond | US Treasury vs. Vanguard Intermediate Term Treasury |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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