Correlation Between Vanguard Growth and IShares Agency

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

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

Diversification Opportunities for Vanguard Growth and IShares Agency

-0.73

Correlation Coefficient

Vanguard Growth  IShares Agency

Pay attention - limited upside

The 3 months correlation between Vanguard and IShares is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and iShares Agency Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Agency Bond and Vanguard Growth 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 Growth Index are associated (or correlated) with IShares Agency. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Agency Bond has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and IShares Agency go up and down completely randomly.

Pair Corralation between Vanguard Growth and IShares Agency

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the IShares Agency. In addition to that, Vanguard Growth is 7.39 times more volatile than iShares Agency Bond. It trades about -0.09 of its total potential returns per unit of risk. iShares Agency Bond is currently generating about 0.16 per unit of volatility. If you would invest  10,729  in iShares Agency Bond on December 29, 2024 and sell it today you would earn a total of  203.00  from holding iShares Agency Bond or generate 1.89% return on investment over 90 days.

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

Vanguard Growth Index  vs.  iShares Agency Bond

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Growth Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

iShares Agency Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Agency Bond are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, IShares Agency is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Growth and IShares Agency

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

The idea behind Vanguard Growth Index and iShares Agency Bond 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.