Correlation Between Vanguard Short and FlexShares IBoxx
Can any of the company-specific risk be diversified away by investing in both Vanguard Short and FlexShares IBoxx 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 FlexShares IBoxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Short Term Inflation Protected and FlexShares iBoxx 5 Year, you can compare the effects of market volatilities on Vanguard Short and FlexShares IBoxx 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 FlexShares IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and FlexShares IBoxx.
Diversification Opportunities for Vanguard Short and FlexShares IBoxx
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and FlexShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Inflation and FlexShares iBoxx 5 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares iBoxx 5 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 Inflation Protected are associated (or correlated) with FlexShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares iBoxx 5 has no effect on the direction of Vanguard Short i.e., Vanguard Short and FlexShares IBoxx go up and down completely randomly.
Pair Corralation between Vanguard Short and FlexShares IBoxx
Given the investment horizon of 90 days Vanguard Short is expected to generate 1.55 times less return on investment than FlexShares IBoxx. But when comparing it to its historical volatility, Vanguard Short Term Inflation Protected is 1.92 times less risky than FlexShares IBoxx. It trades about 0.38 of its potential returns per unit of risk. FlexShares iBoxx 5 Year is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,346 in FlexShares iBoxx 5 Year on June 11, 2025 and sell it today you would earn a total of 94.00 from holding FlexShares iBoxx 5 Year or generate 4.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Inflation vs. FlexShares iBoxx 5 Year
Performance |
| Timeline |
| Vanguard Short Term |
| FlexShares iBoxx 5 |
Vanguard Short and FlexShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short and FlexShares IBoxx
The main advantage of trading using opposite Vanguard Short and FlexShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short position performs unexpectedly, FlexShares IBoxx 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 FlexShares IBoxx will offset losses from the drop in FlexShares IBoxx's long position.| Vanguard Short vs. Goldman Sachs Access | Vanguard Short vs. FlexShares iBoxx 5 Year | Vanguard Short vs. FlexShares iBoxx 3 Year | Vanguard Short vs. SPDR Bloomberg 1 10 |
| FlexShares IBoxx vs. Vanguard Short Term Inflation Protected | FlexShares IBoxx vs. iShares TIPS Bond | FlexShares IBoxx vs. Invesco PureBeta 0 5 | FlexShares IBoxx vs. Goldman Sachs Access |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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