Correlation Between Vanguard Value and US Treasury
Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and US Treasury 3, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and US Treasury.
Diversification Opportunities for Vanguard Value and US Treasury
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and UTRE is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and US Treasury 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 3 and Vanguard Value 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 Value Index 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 3 has no effect on the direction of Vanguard Value i.e., Vanguard Value and US Treasury go up and down completely randomly.
Pair Corralation between Vanguard Value and US Treasury
Considering the 90-day investment horizon Vanguard Value Index is expected to generate 3.65 times more return on investment than US Treasury. However, Vanguard Value is 3.65 times more volatile than US Treasury 3. It trades about 0.17 of its potential returns per unit of risk. US Treasury 3 is currently generating about 0.09 per unit of risk. If you would invest 14,006 in Vanguard Value Index on September 2, 2024 and sell it today you would earn a total of 4,181 from holding Vanguard Value Index or generate 29.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Value Index vs. US Treasury 3
Performance |
| Timeline |
| Vanguard Value Index |
| US Treasury 3 |
Vanguard Value and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Value and US Treasury
The main advantage of trading using opposite Vanguard Value and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Value vs. Vanguard Growth Index | Vanguard Value vs. Vanguard Small Cap Value | Vanguard Value vs. Vanguard Mid Cap Value | Vanguard Value vs. Vanguard Small Cap Index |
| US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 7 | US Treasury vs. US Treasury 20 |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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