Correlation Between Vanguard FTSE and IShares Treasury

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

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

Diversification Opportunities for Vanguard FTSE and IShares Treasury

0.94

Correlation Coefficient

Vanguard FTSE  IShares Treasury

Almost no diversification

The 3 months correlation between Vanguard and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares Treasury Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Floating and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Floating has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Treasury go up and down completely randomly.

Pair Corralation between Vanguard FTSE and IShares Treasury

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 44.73 times more return on investment than IShares Treasury. However, Vanguard FTSE is 44.73 times more volatile than iShares Treasury Floating. It trades about 0.14 of its potential returns per unit of risk. iShares Treasury Floating is currently generating about 0.87 per unit of risk. If you would invest  4,759  in Vanguard FTSE Developed on December 29, 2024 and sell it today you would earn a total of  365.00  from holding Vanguard FTSE Developed or generate 7.67% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  iShares Treasury Floating

Vanguard FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares Treasury Floating

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Treasury Floating are ranked lower than 69 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, IShares Treasury is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and IShares Treasury

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

The idea behind Vanguard FTSE Developed and iShares Treasury Floating 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.