Correlation Between US Treasury and Vanguard Extended

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

By analyzing existing cross correlation between US Treasury 6 and Vanguard Extended Duration, you can compare the effects of market volatilities on US Treasury and Vanguard Extended 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 US Treasury with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Vanguard Extended.

Diversification Opportunities for US Treasury and Vanguard Extended

-0.62

Correlation Coefficient

US Treasury  Vanguard Extended

Excellent diversification

The 3 months correlation between XBIL and Vanguard is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 6 and Vanguard Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended and US Treasury 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 US Treasury 6 are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended has no effect on the direction of US Treasury i.e., US Treasury and Vanguard Extended go up and down completely randomly.

Pair Corralation between US Treasury and Vanguard Extended

Given the investment horizon of 90 days US Treasury 6 is expected to generate 0.02 times more return on investment than Vanguard Extended. However, US Treasury 6 is 51.53 times less risky than Vanguard Extended. It trades about 0.73 of its potential returns per unit of risk. Vanguard Extended Duration is currently generating about -0.01 per unit of risk. If you would invest  4,546  in US Treasury 6 on November 19, 2024 and sell it today you would earn a total of  465.00  from holding US Treasury 6 or generate 10.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.99%
Values	Daily Returns

US Treasury 6  vs.  Vanguard Extended Duration

US Treasury 6

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 6 are ranked lower than 64 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, US Treasury is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Extended

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Extended Duration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Vanguard Extended is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with US Treasury and Vanguard Extended

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

The idea behind US Treasury 6 and Vanguard Extended Duration 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.