Correlation Between Vanguard Intermediate and US Treasury

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

By analyzing existing cross correlation between Vanguard Intermediate Term Treasury and US Treasury 12, you can compare the effects of market volatilities on Vanguard Intermediate and US Treasury 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 Intermediate with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and US Treasury.

Diversification Opportunities for Vanguard Intermediate and US Treasury

-0.43

Correlation Coefficient

Vanguard Intermediate  US Treasury

Very good diversification

The 3 months correlation between Vanguard and OBIL is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tre and US Treasury 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 12 and Vanguard Intermediate 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 Intermediate Term Treasury are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 12 has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and US Treasury go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and US Treasury

Given the investment horizon of 90 days Vanguard Intermediate is expected to generate 1.32 times less return on investment than US Treasury. In addition to that, Vanguard Intermediate is 5.42 times more volatile than US Treasury 12. It trades about 0.06 of its total potential returns per unit of risk. US Treasury 12 is currently generating about 0.42 per unit of volatility. If you would invest  4,870  in US Treasury 12 on September 15, 2024 and sell it today you would earn a total of  135.00  from holding US Treasury 12 or generate 2.77% return on investment over 90 days.

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

Vanguard Intermediate Term Tre  vs.  US Treasury 12

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

US Treasury 12

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Treasury 12 are ranked lower than 19 (%) 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 newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vanguard Intermediate and US Treasury

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

The idea behind Vanguard Intermediate Term Treasury and US Treasury 12 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.