Correlation Between IShares GNMA and Vanguard Long
Can any of the company-specific risk be diversified away by investing in both IShares GNMA and Vanguard Long 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 GNMA and Vanguard Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares GNMA Bond and Vanguard Long Term Treasury, you can compare the effects of market volatilities on IShares GNMA and Vanguard Long 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 GNMA with a short position of Vanguard Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GNMA and Vanguard Long.
Diversification Opportunities for IShares GNMA and Vanguard Long
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares GNMA Bond and Vanguard Long Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and IShares GNMA 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 GNMA Bond are associated (or correlated) with Vanguard Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of IShares GNMA i.e., IShares GNMA and Vanguard Long go up and down completely randomly.
Pair Corralation between IShares GNMA and Vanguard Long
Given the investment horizon of 90 days IShares GNMA is expected to generate 1.68 times less return on investment than Vanguard Long. But when comparing it to its historical volatility, iShares GNMA Bond is 2.38 times less risky than Vanguard Long. It trades about 0.06 of its potential returns per unit of risk. Vanguard Long Term Treasury is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,765 in Vanguard Long Term Treasury on August 29, 2024 and sell it today you would earn a total of 47.00 from holding Vanguard Long Term Treasury or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares GNMA Bond vs. Vanguard Long Term Treasury
Performance |
| Timeline |
| iShares GNMA Bond |
| Vanguard Long Term |
IShares GNMA and Vanguard Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares GNMA and Vanguard Long
The main advantage of trading using opposite IShares GNMA and Vanguard Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GNMA position performs unexpectedly, Vanguard Long 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 Long will offset losses from the drop in Vanguard Long's long position.| IShares GNMA vs. Vanguard Long Term Treasury | IShares GNMA vs. Vanguard Short Term Treasury | IShares GNMA vs. Vanguard Intermediate Term Corporate | IShares GNMA vs. Vanguard Mortgage Backed Securities |
| Vanguard Long vs. Vanguard Intermediate Term Treasury | Vanguard Long vs. Vanguard Short Term Treasury | Vanguard Long vs. Vanguard Long Term Corporate | Vanguard Long vs. Vanguard Extended Duration |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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