Correlation Between Vanguard Long and IShares Core

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

By analyzing existing cross correlation between Vanguard Long Term Bond and iShares Core 10, you can compare the effects of market volatilities on Vanguard Long and IShares Core 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 IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long and IShares Core.

Diversification Opportunities for Vanguard Long and IShares Core

1.0

Correlation Coefficient

Vanguard Long  IShares Core

No risk reduction

The 3 months correlation between Vanguard and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Bond and iShares Core 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core 10 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 Bond are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core 10 has no effect on the direction of Vanguard Long i.e., Vanguard Long and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Long and IShares Core

Considering the 90-day investment horizon Vanguard Long Term Bond is expected to under-perform the IShares Core. In addition to that, Vanguard Long is 1.04 times more volatile than iShares Core 10. It trades about -0.03 of its total potential returns per unit of risk. iShares Core 10 is currently generating about -0.02 per unit of volatility. If you would invest  5,202  in iShares Core 10 on September 2, 2024 and sell it today you would lose (55.00) from holding iShares Core 10 or give up 1.06% of portfolio value over 90 days.

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

Vanguard Long Term Bond  vs.  iShares Core 10

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Core 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Long and IShares Core

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

The idea behind Vanguard Long Term Bond and iShares Core 10 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.