Correlation Between Total Return and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Total Return and Vanguard Total 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 Total Return and Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Bond and Vanguard Total Bond, you can compare the effects of market volatilities on Total Return and Vanguard Total 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 Total Return with a short position of Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Vanguard Total.
Diversification Opportunities for Total Return and Vanguard Total
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Total and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Bond and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond and Total Return 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 Total Return Bond are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Total Return i.e., Total Return and Vanguard Total go up and down completely randomly.
Pair Corralation between Total Return and Vanguard Total
Assuming the 90 days horizon Total Return Bond is expected to generate 0.72 times more return on investment than Vanguard Total. However, Total Return Bond is 1.39 times less risky than Vanguard Total. It trades about 0.04 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.02 per unit of risk. If you would invest 1,031 in Total Return Bond on September 4, 2024 and sell it today you would earn a total of 80.00 from holding Total Return Bond or generate 7.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Bond vs. Vanguard Total Bond
Performance |
| Timeline |
| Total Return Bond |
| Vanguard Total Bond |
Total Return and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Vanguard Total
The main advantage of trading using opposite Total Return and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.| Total Return vs. Prudential Real Estate | Total Return vs. Fidelity Real Estate | Total Return vs. Virtus Real Estate | Total Return vs. Goldman Sachs Real |
| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard 500 Index |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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