Correlation Between Vanguard Extended and Vanguard Short
Can any of the company-specific risk be diversified away by investing in both Vanguard Extended and Vanguard Short 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 Extended and Vanguard Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Extended Duration and Vanguard Short Term Bond, you can compare the effects of market volatilities on Vanguard Extended and Vanguard Short 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 Extended with a short position of Vanguard Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Extended and Vanguard Short.
Diversification Opportunities for Vanguard Extended and Vanguard Short
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Duration and Vanguard Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Vanguard Extended 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 Extended Duration are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and Vanguard Short go up and down completely randomly.
Pair Corralation between Vanguard Extended and Vanguard Short
Considering the 90-day investment horizon Vanguard Extended Duration is expected to under-perform the Vanguard Short. In addition to that, Vanguard Extended is 12.26 times more volatile than Vanguard Short Term Bond. It trades about -0.06 of its total potential returns per unit of risk. Vanguard Short Term Bond is currently generating about -0.11 per unit of volatility. If you would invest 7,754 in Vanguard Short Term Bond on August 24, 2024 and sell it today you would lose (23.00) from holding Vanguard Short Term Bond or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Extended Duration vs. Vanguard Short Term Bond
Performance |
| Timeline |
| Vanguard Extended |
| Vanguard Short Term |
Vanguard Extended and Vanguard Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Extended and Vanguard Short
The main advantage of trading using opposite Vanguard Extended and Vanguard Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended position performs unexpectedly, Vanguard Short 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 Short will offset losses from the drop in Vanguard Short's long position.| Vanguard Extended vs. Vanguard Long Term Treasury | Vanguard Extended vs. Vanguard Long Term Corporate | Vanguard Extended vs. Vanguard Long Term Bond | Vanguard Extended vs. PIMCO 25 Year |
| Vanguard Short vs. Vanguard Intermediate Term Bond | Vanguard Short vs. Vanguard Long Term Bond | Vanguard Short vs. Vanguard Short Term Corporate | Vanguard Short vs. Vanguard Total Bond |
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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