Correlation Between International Investors and Vanguard Municipal
Can any of the company-specific risk be diversified away by investing in both International Investors and Vanguard Municipal 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 International Investors and Vanguard Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Investors Gold and Vanguard Municipal Bond, you can compare the effects of market volatilities on International Investors and Vanguard Municipal 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 International Investors with a short position of Vanguard Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Investors and Vanguard Municipal.
Diversification Opportunities for International Investors and Vanguard Municipal
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between INTERNATIONAL and Vanguard is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding International Investors Gold and Vanguard Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Municipal Bond and International Investors 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 International Investors Gold are associated (or correlated) with Vanguard Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Municipal Bond has no effect on the direction of International Investors i.e., International Investors and Vanguard Municipal go up and down completely randomly.
Pair Corralation between International Investors and Vanguard Municipal
Assuming the 90 days horizon International Investors Gold is expected to generate 19.46 times more return on investment than Vanguard Municipal. However, International Investors is 19.46 times more volatile than Vanguard Municipal Bond. It trades about 0.07 of its potential returns per unit of risk. Vanguard Municipal Bond is currently generating about 0.09 per unit of risk. If you would invest 862.00 in International Investors Gold on September 2, 2024 and sell it today you would earn a total of 115.00 from holding International Investors Gold or generate 13.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
International Investors Gold vs. Vanguard Municipal Bond
Performance |
| Timeline |
| International Investors |
| Vanguard Municipal Bond |
International Investors and Vanguard Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Investors and Vanguard Municipal
The main advantage of trading using opposite International Investors and Vanguard Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Investors position performs unexpectedly, Vanguard Municipal 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 Municipal will offset losses from the drop in Vanguard Municipal's long position.The idea behind International Investors Gold and Vanguard Municipal 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.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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