Correlation Between IShares Core and Vanguard Intermediate

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

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

Diversification Opportunities for IShares Core and Vanguard Intermediate

1.0

Correlation Coefficient

IShares Core  Vanguard Intermediate

No risk reduction

The 3 months correlation between IShares and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core Aggregate and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and IShares Core 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 Core Aggregate are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of IShares Core i.e., IShares Core and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between IShares Core and Vanguard Intermediate

Considering the 90-day investment horizon iShares Core Aggregate is expected to under-perform the Vanguard Intermediate. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core Aggregate is 1.03 times less risky than Vanguard Intermediate. The etf trades about -0.07 of its potential returns per unit of risk. The Vanguard Intermediate Term Bond is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,457  in Vanguard Intermediate Term Bond on February 4, 2024 and sell it today you would lose (48.00) from holding Vanguard Intermediate Term Bond or give up 0.64% of portfolio value over 90 days.

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

iShares Core Aggregate  vs.  Vanguard Intermediate Term Bon

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.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Core and Vanguard Intermediate

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

The idea behind iShares Core Aggregate and Vanguard Intermediate Term 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.