Correlation Between US Treasury and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both US Treasury and Vanguard Extended 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 US Treasury and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Treasury 12 and Vanguard Extended Duration, you can compare the effects of market volatilities on US Treasury and Vanguard Extended 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 US Treasury with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Treasury and Vanguard Extended.
Diversification Opportunities for US Treasury and Vanguard Extended
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between OBIL and Vanguard is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding US Treasury 12 and Vanguard Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended and US Treasury 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 US Treasury 12 are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended has no effect on the direction of US Treasury i.e., US Treasury and Vanguard Extended go up and down completely randomly.
Pair Corralation between US Treasury and Vanguard Extended
Given the investment horizon of 90 days US Treasury is expected to generate 3.32 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, US Treasury 12 is 29.91 times less risky than Vanguard Extended. It trades about 0.32 of its potential returns per unit of risk. Vanguard Extended Duration is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,772 in Vanguard Extended Duration on November 1, 2024 and sell it today you would earn a total of 43.00 from holding Vanguard Extended Duration or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Treasury 12 vs. Vanguard Extended Duration
Performance |
| Timeline |
| US Treasury 12 |
| Vanguard Extended |
US Treasury and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Treasury and Vanguard Extended
The main advantage of trading using opposite US Treasury and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Treasury position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.| US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund | US Treasury vs. Rbb Fund | US Treasury vs. US Treasury 6 |
| 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 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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