Correlation Between Vanguard Intermediate and WisdomTree Yield
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate and WisdomTree Yield 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 Intermediate and WisdomTree Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Intermediate Term Bond and WisdomTree Yield Enhanced, you can compare the effects of market volatilities on Vanguard Intermediate and WisdomTree Yield 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 Intermediate with a short position of WisdomTree Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and WisdomTree Yield.
Diversification Opportunities for Vanguard Intermediate and WisdomTree Yield
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and WisdomTree is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Bon and WisdomTree Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Yield Enhanced and Vanguard Intermediate 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 Intermediate Term Bond are associated (or correlated) with WisdomTree Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Yield Enhanced has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and WisdomTree Yield go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and WisdomTree Yield
Considering the 90-day investment horizon Vanguard Intermediate Term Bond is expected to under-perform the WisdomTree Yield. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Intermediate Term Bond is 1.06 times less risky than WisdomTree Yield. The etf trades about -0.14 of its potential returns per unit of risk. The WisdomTree Yield Enhanced is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 4,452 in WisdomTree Yield Enhanced on September 19, 2024 and sell it today you would lose (103.00) from holding WisdomTree Yield Enhanced or give up 2.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Intermediate Term Bon vs. WisdomTree Yield Enhanced
Performance |
| Timeline |
| Vanguard Intermediate |
| WisdomTree Yield Enhanced |
Vanguard Intermediate and WisdomTree Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and WisdomTree Yield
The main advantage of trading using opposite Vanguard Intermediate and WisdomTree Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate position performs unexpectedly, WisdomTree Yield 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 WisdomTree Yield will offset losses from the drop in WisdomTree Yield's long position.The idea behind Vanguard Intermediate Term Bond and WisdomTree Yield Enhanced 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.
| WisdomTree Yield vs. WisdomTree Interest Rate | WisdomTree Yield vs. WisdomTree Interest Rate | WisdomTree Yield vs. SPDR Barclays Intermediate | WisdomTree Yield vs. WisdomTree International Hedged |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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