Correlation Between Investment Grade and Vanguard Intermediate-ter
Can any of the company-specific risk be diversified away by investing in both Investment Grade and Vanguard Intermediate-ter 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 Investment Grade and Vanguard Intermediate-ter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investment Grade Porate and Vanguard Intermediate Term Investment Grade, you can compare the effects of market volatilities on Investment Grade and Vanguard Intermediate-ter 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 Investment Grade with a short position of Vanguard Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment Grade and Vanguard Intermediate-ter.
Diversification Opportunities for Investment Grade and Vanguard Intermediate-ter
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Investment and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Investment Grade Porate and Vanguard Intermediate Term Inv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate-ter and Investment Grade 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 Investment Grade Porate are associated (or correlated) with Vanguard Intermediate-ter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate-ter has no effect on the direction of Investment Grade i.e., Investment Grade and Vanguard Intermediate-ter go up and down completely randomly.
Pair Corralation between Investment Grade and Vanguard Intermediate-ter
Assuming the 90 days horizon Investment Grade is expected to generate 1.24 times less return on investment than Vanguard Intermediate-ter. But when comparing it to its historical volatility, Investment Grade Porate is 1.02 times less risky than Vanguard Intermediate-ter. It trades about 0.09 of its potential returns per unit of risk. Vanguard Intermediate Term Investment Grade is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 824.00 in Vanguard Intermediate Term Investment Grade on August 24, 2024 and sell it today you would earn a total of 38.00 from holding Vanguard Intermediate Term Investment Grade or generate 4.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investment Grade Porate vs. Vanguard Intermediate Term Inv
Performance |
| Timeline |
| Investment Grade Porate |
| Vanguard Intermediate-ter |
Investment Grade and Vanguard Intermediate-ter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment Grade and Vanguard Intermediate-ter
The main advantage of trading using opposite Investment Grade and Vanguard Intermediate-ter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment Grade position performs unexpectedly, Vanguard Intermediate-ter 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 Intermediate-ter will offset losses from the drop in Vanguard Intermediate-ter's long position.| Investment Grade vs. Western Asset High | Investment Grade vs. Metropolitan West High | Investment Grade vs. Siit High Yield | Investment Grade vs. Morningstar Aggressive Growth |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |