Correlation Between IShares 1 and Vanguard Long

Can any of the company-specific risk be diversified away by investing in both IShares 1 and Vanguard Long 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 IShares 1 and Vanguard Long into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 3 Year and Vanguard Long Term Bond, you can compare the effects of market volatilities on IShares 1 and Vanguard Long 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 IShares 1 with a short position of Vanguard Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and Vanguard Long.

Diversification Opportunities for IShares 1 and Vanguard Long

0.83

Correlation Coefficient

IShares 1  Vanguard Long

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and Vanguard Long Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and IShares 1 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 iShares 1 3 Year are associated (or correlated) with Vanguard Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of IShares 1 i.e., IShares 1 and Vanguard Long go up and down completely randomly.

Pair Corralation between IShares 1 and Vanguard Long

Given the investment horizon of 90 days iShares 1 3 Year is expected to generate 0.56 times more return on investment than Vanguard Long. However, iShares 1 3 Year is 1.77 times less risky than Vanguard Long. It trades about -0.24 of its potential returns per unit of risk. Vanguard Long Term Bond is currently generating about -0.16 per unit of risk. If you would invest  7,216  in iShares 1 3 Year on September 26, 2024 and sell it today you would lose (448.00) from holding iShares 1 3 Year or give up 6.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares 1 3 Year  vs.  Vanguard Long Term Bond

iShares 1 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 1 3 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical 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.

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 fund investors. In spite of latest fragile performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with IShares 1 and Vanguard Long

The main advantage of trading using opposite IShares 1 and Vanguard Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, Vanguard Long 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 Long will offset losses from the drop in Vanguard Long's long position.

The idea behind iShares 1 3 Year and Vanguard Long Term 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.