Correlation Between Vanguard Intermediate and FlexShares Core
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate and FlexShares Core 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 FlexShares Core 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 FlexShares Core Select, you can compare the effects of market volatilities on Vanguard Intermediate and FlexShares Core 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 FlexShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and FlexShares Core.
Diversification Opportunities for Vanguard Intermediate and FlexShares Core
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and FlexShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Bon and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select 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 FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and FlexShares Core go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and FlexShares Core
Considering the 90-day investment horizon Vanguard Intermediate Term Bond is expected to generate 1.02 times more return on investment than FlexShares Core. However, Vanguard Intermediate is 1.02 times more volatile than FlexShares Core Select. It trades about -0.04 of its potential returns per unit of risk. FlexShares Core Select is currently generating about -0.05 per unit of risk. If you would invest 7,710 in Vanguard Intermediate Term Bond on September 2, 2024 and sell it today you would lose (62.00) from holding Vanguard Intermediate Term Bond or give up 0.8% 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. FlexShares Core Select
Performance |
| Timeline |
| Vanguard Intermediate |
| FlexShares Core Select |
Vanguard Intermediate and FlexShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and FlexShares Core
The main advantage of trading using opposite Vanguard Intermediate and FlexShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate position performs unexpectedly, FlexShares Core 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 Core will offset losses from the drop in FlexShares Core's long position.The idea behind Vanguard Intermediate Term Bond and FlexShares Core Select 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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