Correlation Between Vanguard FTSE and IShares Treasury
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and IShares 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 FTSE and IShares Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Developed and iShares Treasury Bond, you can compare the effects of market volatilities on Vanguard FTSE and IShares 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 FTSE with a short position of IShares Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and IShares Treasury.
Diversification Opportunities for Vanguard FTSE and IShares Treasury
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and IShares Treasury go up and down completely randomly.
Pair Corralation between Vanguard FTSE and IShares Treasury
Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the IShares Treasury. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.14 times less risky than IShares Treasury. The etf trades about -0.12 of its potential returns per unit of risk. The iShares Treasury Bond is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 465.00 in iShares Treasury Bond on September 13, 2024 and sell it today you would lose (5.00) from holding iShares Treasury Bond or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Developed vs. iShares Treasury Bond
Performance |
| Timeline |
| Vanguard FTSE Developed |
| iShares Treasury Bond |
Vanguard FTSE and IShares Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and IShares Treasury
The main advantage of trading using opposite Vanguard FTSE and IShares Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, IShares 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 IShares Treasury will offset losses from the drop in IShares Treasury's long position.| Vanguard FTSE vs. Leverage Shares 2x | Vanguard FTSE vs. Amundi Index Solutions | Vanguard FTSE vs. Amundi Index Solutions | Vanguard FTSE vs. Albion Venture Capital |
| IShares Treasury vs. Vanguard FTSE Developed | IShares Treasury vs. Leverage Shares 2x | IShares Treasury vs. Amundi Index Solutions | IShares Treasury vs. Amundi Index Solutions |
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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