Correlation Between Vanguard Total and The Bond
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and The Bond 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 Total and The Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and The Bond Fund, you can compare the effects of market volatilities on Vanguard Total and The Bond 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 Total with a short position of The Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and The Bond.
Diversification Opportunities for Vanguard Total and The Bond
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and The is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and The Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bond Fund and Vanguard Total 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 Total Bond are associated (or correlated) with The Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bond Fund has no effect on the direction of Vanguard Total i.e., Vanguard Total and The Bond go up and down completely randomly.
Pair Corralation between Vanguard Total and The Bond
Assuming the 90 days horizon Vanguard Total is expected to generate 1.15 times less return on investment than The Bond. In addition to that, Vanguard Total is 1.0 times more volatile than The Bond Fund. It trades about 0.06 of its total potential returns per unit of risk. The Bond Fund is currently generating about 0.07 per unit of volatility. If you would invest 1,697 in The Bond Fund on September 2, 2024 and sell it today you would earn a total of 101.00 from holding The Bond Fund or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. The Bond Fund
Performance |
| Timeline |
| Vanguard Total Bond |
| Bond Fund |
Vanguard Total and The Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and The Bond
The main advantage of trading using opposite Vanguard Total and The Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, The Bond 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 The Bond will offset losses from the drop in The Bond's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard 500 Index |
| The Bond vs. Ab Bond Inflation | The Bond vs. Guidepath Managed Futures | The Bond vs. Aqr Managed Futures | The Bond vs. Ab Bond Inflation |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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