Correlation Between IShares Trust and Vanguard Bond
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Vanguard Bond 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 Trust and Vanguard Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Vanguard Bond Index, you can compare the effects of market volatilities on IShares Trust and Vanguard Bond 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 Trust with a short position of Vanguard Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Vanguard Bond.
Diversification Opportunities for IShares Trust and Vanguard Bond
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IShares and Vanguard is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Vanguard Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Bond Index and IShares Trust 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 Trust are associated (or correlated) with Vanguard Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Bond Index has no effect on the direction of IShares Trust i.e., IShares Trust and Vanguard Bond go up and down completely randomly.
Pair Corralation between IShares Trust and Vanguard Bond
Assuming the 90 days trading horizon IShares Trust is expected to generate 1.32 times less return on investment than Vanguard Bond. But when comparing it to its historical volatility, iShares Trust is 2.47 times less risky than Vanguard Bond. It trades about 0.05 of its potential returns per unit of risk. Vanguard Bond Index is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 130,101 in Vanguard Bond Index on September 19, 2024 and sell it today you would earn a total of 18,699 from holding Vanguard Bond Index or generate 14.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 79.92% |
| Values | Daily Returns |
iShares Trust vs. Vanguard Bond Index
Performance |
| Timeline |
| iShares Trust |
| Vanguard Bond Index |
IShares Trust and Vanguard Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Vanguard Bond
The main advantage of trading using opposite IShares Trust and Vanguard Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Vanguard Bond 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 Bond will offset losses from the drop in Vanguard Bond's long position.| IShares Trust vs. Vanguard Index Funds | IShares Trust vs. Vanguard Index Funds | IShares Trust vs. SPDR SP 500 | IShares Trust vs. Vanguard Bond Index |
| Vanguard Bond vs. Vanguard Funds Public | Vanguard Bond vs. Vanguard Specialized Funds | Vanguard Bond vs. Vanguard World | Vanguard Bond vs. Vanguard Index Funds |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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