Correlation Between Vanguard Extended and US Treasury
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended 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 Extended 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 Extended Duration and US Treasury 20, you can compare the effects of market volatilities on Vanguard Extended 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 Extended with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and US Treasury.
Diversification Opportunities for Vanguard Extended and US Treasury
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and UTWY is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Duration and US Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 20 and Vanguard Extended 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 Extended Duration 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 20 has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and US Treasury go up and down completely randomly.
Pair Corralation between Vanguard Extended and US Treasury
Considering the 90-day investment horizon Vanguard Extended Duration is expected to under-perform the US Treasury. In addition to that, Vanguard Extended is 1.94 times more volatile than US Treasury 20. It trades about -0.06 of its total potential returns per unit of risk. US Treasury 20 is currently generating about -0.08 per unit of volatility. If you would invest 4,502 in US Treasury 20 on August 26, 2024 and sell it today you would lose (57.00) from holding US Treasury 20 or give up 1.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Duration vs. US Treasury 20
Performance |
| Timeline |
| Vanguard Extended |
| US Treasury 20 |
Vanguard Extended and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and US Treasury
The main advantage of trading using opposite Vanguard Extended and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended 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 Extended vs. Vanguard Long Term Treasury | Vanguard Extended vs. Vanguard Long Term Corporate | Vanguard Extended vs. Vanguard Long Term Bond | Vanguard Extended vs. PIMCO 25 Year |
| US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 7 | US Treasury vs. US Treasury 3 |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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