Correlation Between Vanguard Intermediate and IShares JP

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

By analyzing existing cross correlation between Vanguard Intermediate Term Treasury and iShares JP Morgan, you can compare the effects of market volatilities on Vanguard Intermediate and IShares JP 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 JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and IShares JP.

Diversification Opportunities for Vanguard Intermediate and IShares JP

0.77

Correlation Coefficient

Vanguard Intermediate  IShares JP

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tre and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 Treasury are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and IShares JP go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and IShares JP

Given the investment horizon of 90 days Vanguard Intermediate Term Treasury is expected to under-perform the IShares JP. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Intermediate Term Treasury is 1.55 times less risky than IShares JP. The etf trades about -0.1 of its potential returns per unit of risk. The iShares JP Morgan is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,951  in iShares JP Morgan on October 3, 2024 and sell it today you would lose (47.00) from holding iShares JP Morgan or give up 0.53% 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 Tre  vs.  iShares JP Morgan

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Treasury 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, IShares JP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Intermediate and IShares JP

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

The idea behind Vanguard Intermediate Term Treasury and iShares JP Morgan 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.