Correlation Between Vanguard Short and IShares Core

Can any of the company-specific risk be diversified away by investing in both Vanguard Short and IShares Core 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 Short and IShares Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Short Term Corporate and iShares Core Aggregate, you can compare the effects of market volatilities on Vanguard Short and IShares Core 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 Short with a short position of IShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and IShares Core.

Diversification Opportunities for Vanguard Short and IShares Core

0.74

Correlation Coefficient

Vanguard Short  IShares Core

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Corporate and iShares Core Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Aggregate and Vanguard Short 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 Short Term Corporate are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Aggregate has no effect on the direction of Vanguard Short i.e., Vanguard Short and IShares Core go up and down completely randomly.

Pair Corralation between Vanguard Short and IShares Core

Given the investment horizon of 90 days Vanguard Short Term Corporate is expected to generate 0.47 times more return on investment than IShares Core. However, Vanguard Short Term Corporate is 2.11 times less risky than IShares Core. It trades about -0.01 of its potential returns per unit of risk. iShares Core Aggregate is currently generating about -0.11 per unit of risk. If you would invest  7,673  in Vanguard Short Term Corporate on February 3, 2024 and sell it today you would lose (2.00) from holding Vanguard Short Term Corporate or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Vanguard Short Term Corporate  vs.  iShares Core Aggregate

Vanguard Short Term

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Corporate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Short is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

iShares Core Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Core is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Short and IShares Core

The main advantage of trading using opposite Vanguard Short and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.

The idea behind Vanguard Short Term Corporate and iShares Core Aggregate 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.