Correlation Between IShares GovernmentCredit and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both IShares GovernmentCredit and Vanguard Total 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 GovernmentCredit and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares GovernmentCredit Bond and Vanguard Total Bond, you can compare the effects of market volatilities on IShares GovernmentCredit and Vanguard Total 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 GovernmentCredit with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GovernmentCredit and Vanguard Total.
Diversification Opportunities for IShares GovernmentCredit and Vanguard Total
1.0 | Correlation Coefficient |
No risk reduction
The 24 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares GovernmentCredit Bond and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and IShares GovernmentCredit 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 GovernmentCredit Bond are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of IShares GovernmentCredit i.e., IShares GovernmentCredit and Vanguard Total go up and down completely randomly.
Pair Corralation between IShares GovernmentCredit and Vanguard Total
Considering the 90-day investment horizon iShares GovernmentCredit Bond is expected to generate 0.97 times more return on investment than Vanguard Total. However, iShares GovernmentCredit Bond is 1.04 times less risky than Vanguard Total. It trades about -0.01 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about -0.01 per unit of risk. If you would invest 10,280 in iShares GovernmentCredit Bond on January 24, 2024 and sell it today you would lose (168.00) from holding iShares GovernmentCredit Bond or give up 1.63% of portfolio value over 90 days.
| Time Period | 24 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares GovernmentCredit Bond vs. Vanguard Total Bond
Performance |
| Timeline |
| IShares GovernmentCredit |
| Vanguard Total Bond |
IShares GovernmentCredit and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares GovernmentCredit and Vanguard Total
The main advantage of trading using opposite IShares GovernmentCredit and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GovernmentCredit position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.The idea behind iShares GovernmentCredit Bond and Vanguard Total Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Vanguard Total vs. VictoryShares USAA Core | Vanguard Total vs. VictoryShares International Value | Vanguard Total vs. VictoryShares Small Mid | Vanguard Total vs. VictoryShares Value Momentum |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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