Correlation Between IShares 1 and Vanguard Intermediate

Can any of the company-specific risk be diversified away by investing in both IShares 1 and Vanguard Intermediate 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 Intermediate 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 Intermediate Term Government, you can compare the effects of market volatilities on IShares 1 and Vanguard Intermediate 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 Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and Vanguard Intermediate.

Diversification Opportunities for IShares 1 and Vanguard Intermediate

0.92

Correlation Coefficient

IShares 1  Vanguard Intermediate

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and Vanguard Intermediate Term Gov in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of IShares 1 i.e., IShares 1 and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between IShares 1 and Vanguard Intermediate

Given the investment horizon of 90 days iShares 1 3 Year is expected to under-perform the Vanguard Intermediate. In addition to that, IShares 1 is 1.55 times more volatile than Vanguard Intermediate Term Government. It trades about -0.11 of its total potential returns per unit of risk. Vanguard Intermediate Term Government is currently generating about -0.08 per unit of volatility. If you would invest  2,015  in Vanguard Intermediate Term Government on September 3, 2024 and sell it today you would lose (28.00) from holding Vanguard Intermediate Term Government or give up 1.39% of portfolio value over 90 days.

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

iShares 1 3 Year  vs.  Vanguard Intermediate Term Gov

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 nearly stable technical indicators, IShares 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Government has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Vanguard Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares 1 and Vanguard Intermediate

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

The idea behind iShares 1 3 Year and Vanguard Intermediate Term Government 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.