Correlation Between Vanguard Long and US Treasury
Can any of the company-specific risk be diversified away by investing in both Vanguard Long 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 Long 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 Long Term Bond and US Treasury 30, you can compare the effects of market volatilities on Vanguard Long 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 Long with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long and US Treasury.
Diversification Opportunities for Vanguard Long and US Treasury
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and UTHY is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Bond and US Treasury 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 30 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 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 30 has no effect on the direction of Vanguard Long i.e., Vanguard Long and US Treasury go up and down completely randomly.
Pair Corralation between Vanguard Long and US Treasury
Considering the 90-day investment horizon Vanguard Long Term Bond is expected to under-perform the US Treasury. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Long Term Bond is 1.22 times less risky than US Treasury. The etf trades about -0.04 of its potential returns per unit of risk. The US Treasury 30 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 4,420 in US Treasury 30 on September 13, 2024 and sell it today you would lose (30.00) from holding US Treasury 30 or give up 0.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Vanguard Long Term Bond vs. US Treasury 30
Performance |
| Timeline |
| Vanguard Long Term |
| US Treasury 30 |
Vanguard Long and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Long and US Treasury
The main advantage of trading using opposite Vanguard Long and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long 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.| Vanguard Long vs. Vanguard Intermediate Term Bond | Vanguard Long vs. Vanguard Short Term Bond | Vanguard Long vs. Vanguard Long Term Corporate | Vanguard Long vs. Vanguard Long Term Treasury |
| US Treasury vs. Vanguard Long Term Treasury | US Treasury vs. Vanguard Long Term Corporate | US Treasury vs. Vanguard Long Term Bond | US Treasury vs. Vanguard Intermediate Term Treasury |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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