Correlation Between Vanguard Total and Homestead Intermediate
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Homestead Intermediate 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 Homestead Intermediate 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 Homestead Intermediate Bond, you can compare the effects of market volatilities on Vanguard Total and Homestead Intermediate 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 Homestead Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Homestead Intermediate.
Diversification Opportunities for Vanguard Total and Homestead Intermediate
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Homestead is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Homestead Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homestead Intermediate 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 Homestead Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homestead Intermediate has no effect on the direction of Vanguard Total i.e., Vanguard Total and Homestead Intermediate go up and down completely randomly.
Pair Corralation between Vanguard Total and Homestead Intermediate
Assuming the 90 days horizon Vanguard Total is expected to generate 1.05 times less return on investment than Homestead Intermediate. But when comparing it to its historical volatility, Vanguard Total Bond is 1.05 times less risky than Homestead Intermediate. It trades about 0.08 of its potential returns per unit of risk. Homestead Intermediate Bond is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 457.00 in Homestead Intermediate Bond on August 31, 2024 and sell it today you would earn a total of 3.00 from holding Homestead Intermediate Bond or generate 0.66% 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. Homestead Intermediate Bond
Performance |
| Timeline |
| Vanguard Total Bond |
| Homestead Intermediate |
Vanguard Total and Homestead Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Homestead Intermediate
The main advantage of trading using opposite Vanguard Total and Homestead Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Homestead Intermediate 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 Homestead Intermediate will offset losses from the drop in Homestead Intermediate's long position.| Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Total Stock | Vanguard Total vs. Vanguard Small Cap Index | Vanguard Total vs. Vanguard 500 Index |
| Homestead Intermediate vs. Vanguard Total Bond | Homestead Intermediate vs. Vanguard Total Bond | Homestead Intermediate vs. Vanguard Total Bond | Homestead Intermediate vs. Vanguard Total Bond |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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