Correlation Between Morningstar Defensive and Vanguard Gnma
Can any of the company-specific risk be diversified away by investing in both Morningstar Defensive and Vanguard Gnma 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 Morningstar Defensive and Vanguard Gnma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Defensive Bond and Vanguard Gnma Fund, you can compare the effects of market volatilities on Morningstar Defensive and Vanguard Gnma 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 Morningstar Defensive with a short position of Vanguard Gnma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Vanguard Gnma.
Diversification Opportunities for Morningstar Defensive and Vanguard Gnma
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morningstar and Vanguard is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Vanguard Gnma Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Gnma and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Vanguard Gnma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Gnma has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Vanguard Gnma go up and down completely randomly.
Pair Corralation between Morningstar Defensive and Vanguard Gnma
Assuming the 90 days horizon Morningstar Defensive is expected to generate 1.06 times less return on investment than Vanguard Gnma. But when comparing it to its historical volatility, Morningstar Defensive Bond is 2.25 times less risky than Vanguard Gnma. It trades about 0.18 of its potential returns per unit of risk. Vanguard Gnma Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 895.00 in Vanguard Gnma Fund on August 31, 2024 and sell it today you would earn a total of 32.00 from holding Vanguard Gnma Fund or generate 3.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Morningstar Defensive Bond vs. Vanguard Gnma Fund
Performance |
| Timeline |
| Morningstar Defensive |
| Vanguard Gnma |
Morningstar Defensive and Vanguard Gnma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Defensive and Vanguard Gnma
The main advantage of trading using opposite Morningstar Defensive and Vanguard Gnma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Defensive position performs unexpectedly, Vanguard Gnma 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 Gnma will offset losses from the drop in Vanguard Gnma's long position.| Morningstar Defensive vs. John Hancock Money | Morningstar Defensive vs. Ashmore Emerging Markets | Morningstar Defensive vs. Pimco Funds | Morningstar Defensive vs. American Century Investment |
| Vanguard Gnma vs. Vanguard Gnma Fund | Vanguard Gnma vs. Us Government Securities | Vanguard Gnma vs. American Funds Government | Vanguard Gnma vs. Fidelity Sai Treasury |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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