Correlation Between Vanguard Intermediate and Schwab Aggregate
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate and Schwab Aggregate 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 Schwab Aggregate 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 Schwab Aggregate Bond, you can compare the effects of market volatilities on Vanguard Intermediate and Schwab Aggregate 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 Schwab Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and Schwab Aggregate.
Diversification Opportunities for Vanguard Intermediate and Schwab Aggregate
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Schwab is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Bon and Schwab Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Aggregate Bond 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 Schwab Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Aggregate Bond has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Schwab Aggregate go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and Schwab Aggregate
Considering the 90-day investment horizon Vanguard Intermediate is expected to generate 1.46 times less return on investment than Schwab Aggregate. In addition to that, Vanguard Intermediate is 1.03 times more volatile than Schwab Aggregate Bond. It trades about 0.03 of its total potential returns per unit of risk. Schwab Aggregate Bond is currently generating about 0.05 per unit of volatility. If you would invest 2,115 in Schwab Aggregate Bond on August 27, 2024 and sell it today you would earn a total of 178.00 from holding Schwab Aggregate Bond or generate 8.42% return on investment 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. Schwab Aggregate Bond
Performance |
| Timeline |
| Vanguard Intermediate |
| Schwab Aggregate Bond |
Vanguard Intermediate and Schwab Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and Schwab Aggregate
The main advantage of trading using opposite Vanguard Intermediate and Schwab Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate position performs unexpectedly, Schwab Aggregate 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 Schwab Aggregate will offset losses from the drop in Schwab Aggregate's long position.The idea behind Vanguard Intermediate Term Bond and Schwab Aggregate Bond 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.
| Schwab Aggregate vs. Schwab International Equity | Schwab Aggregate vs. Schwab Emerging Markets | Schwab Aggregate vs. Schwab Short Term Treasury | Schwab Aggregate vs. Schwab TIPS ETF |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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