Correlation Between IShares Govt and Vanguard FTSE

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

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

Diversification Opportunities for IShares Govt and Vanguard FTSE

-0.37

Correlation Coefficient

IShares Govt  Vanguard FTSE

Very good diversification

The 3 months correlation between IShares and Vanguard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All and IShares Govt 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 Govt Bond are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE All has no effect on the direction of IShares Govt i.e., IShares Govt and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares Govt and Vanguard FTSE

Assuming the 90 days trading horizon iShares Govt Bond is expected to under-perform the Vanguard FTSE. But the etf apears to be less risky and, when comparing its historical volatility, iShares Govt Bond is 1.36 times less risky than Vanguard FTSE. The etf trades about -0.03 of its potential returns per unit of risk. The Vanguard FTSE All World is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  11,773  in Vanguard FTSE All World on April 25, 2025 and sell it today you would earn a total of  1,297  from holding Vanguard FTSE All World or generate 11.02% return on investment over 90 days.

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

iShares Govt Bond  vs.  Vanguard FTSE All World

iShares Govt Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard FTSE All

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares Govt and Vanguard FTSE

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

The idea behind iShares Govt Bond and Vanguard FTSE All World 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..