Correlation Between IShares Core and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 Core 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 Core Aggregate and Vanguard Intermediate Term Bond, you can compare the effects of market volatilities on IShares Core 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 Core with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Vanguard Intermediate.
Diversification Opportunities for IShares Core and Vanguard Intermediate
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Aggregate and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and IShares Core 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 Core Aggregate 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 Core i.e., IShares Core and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between IShares Core and Vanguard Intermediate
Considering the 90-day investment horizon IShares Core is expected to generate 1.23 times less return on investment than Vanguard Intermediate. But when comparing it to its historical volatility, iShares Core Aggregate is 1.08 times less risky than Vanguard Intermediate. It trades about 0.04 of its potential returns per unit of risk. Vanguard Intermediate Term Bond is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,448 in Vanguard Intermediate Term Bond on October 20, 2024 and sell it today you would earn a total of 22.00 from holding Vanguard Intermediate Term Bond or generate 0.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
iShares Core Aggregate vs. Vanguard Intermediate Term Bon
Performance |
| Timeline |
| iShares Core Aggregate |
| Vanguard Intermediate |
IShares Core and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and Vanguard Intermediate
The main advantage of trading using opposite IShares Core and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.| IShares Core vs. iShares MSCI EAFE | IShares Core vs. iShares iBoxx Investment | IShares Core vs. iShares TIPS Bond | IShares Core vs. iShares 1 3 Year |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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