Correlation Between High-yield Municipal and Vanguard Mid-cap
Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Vanguard Mid-cap 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 High-yield Municipal and Vanguard Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Municipal Fund and Vanguard Mid Cap Value, you can compare the effects of market volatilities on High-yield Municipal and Vanguard Mid-cap 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 High-yield Municipal with a short position of Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Vanguard Mid-cap.
Diversification Opportunities for High-yield Municipal and Vanguard Mid-cap
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between High-yield and Vanguard is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Vanguard Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Vanguard Mid-cap go up and down completely randomly.
Pair Corralation between High-yield Municipal and Vanguard Mid-cap
Assuming the 90 days horizon High-yield Municipal is expected to generate 3.19 times less return on investment than Vanguard Mid-cap. But when comparing it to its historical volatility, High Yield Municipal Fund is 2.71 times less risky than Vanguard Mid-cap. It trades about 0.06 of its potential returns per unit of risk. Vanguard Mid Cap Value is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,644 in Vanguard Mid Cap Value on November 27, 2024 and sell it today you would earn a total of 1,911 from holding Vanguard Mid Cap Value or generate 28.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Municipal Fund vs. Vanguard Mid Cap Value
Performance |
| Timeline |
| High Yield Municipal |
| Vanguard Mid Cap |
High-yield Municipal and Vanguard Mid-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High-yield Municipal and Vanguard Mid-cap
The main advantage of trading using opposite High-yield Municipal and Vanguard Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Vanguard Mid-cap 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 Mid-cap will offset losses from the drop in Vanguard Mid-cap's long position.| High-yield Municipal vs. High Yield Fund Investor | High-yield Municipal vs. Intermediate Term Tax Free Bond | High-yield Municipal vs. California High Yield Municipal | High-yield Municipal vs. T Rowe Price |
| Vanguard Mid-cap vs. Vanguard Small Cap Value | Vanguard Mid-cap vs. Vanguard Mid Cap Growth | Vanguard Mid-cap vs. Vanguard Value Index | Vanguard Mid-cap vs. Vanguard Small Cap Growth |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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