Correlation Between Vanguard Inflation-protec and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Inflation-protec and Vanguard Extended 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 Inflation-protec and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Inflation Protected Securities and Vanguard Extended Market, you can compare the effects of market volatilities on Vanguard Inflation-protec and Vanguard Extended 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 Inflation-protec with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Inflation-protec and Vanguard Extended.
Diversification Opportunities for Vanguard Inflation-protec and Vanguard Extended
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Vanguard is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Inflation Protected S and Vanguard Extended Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended Market and Vanguard Inflation-protec 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 Inflation Protected Securities are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended Market has no effect on the direction of Vanguard Inflation-protec i.e., Vanguard Inflation-protec and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Inflation-protec and Vanguard Extended
Assuming the 90 days horizon Vanguard Inflation Protected Securities is expected to under-perform the Vanguard Extended. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Inflation Protected Securities is 4.06 times less risky than Vanguard Extended. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Vanguard Extended Market is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 34,063 in Vanguard Extended Market on August 29, 2024 and sell it today you would earn a total of 4,251 from holding Vanguard Extended Market or generate 12.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Inflation Protected S vs. Vanguard Extended Market
Performance |
| Timeline |
| Vanguard Inflation-protec |
| Vanguard Extended Market |
Vanguard Inflation-protec and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Inflation-protec and Vanguard Extended
The main advantage of trading using opposite Vanguard Inflation-protec and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Inflation-protec position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.The idea behind Vanguard Inflation Protected Securities and Vanguard Extended Market 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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