Correlation Between Vanguard Total and California High-yield
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and California High-yield 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 California High-yield 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 California High Yield Municipal, you can compare the effects of market volatilities on Vanguard Total and California High-yield 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 California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and California High-yield.
Diversification Opportunities for Vanguard Total and California High-yield
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and California is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield 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 California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of Vanguard Total i.e., Vanguard Total and California High-yield go up and down completely randomly.
Pair Corralation between Vanguard Total and California High-yield
Assuming the 90 days horizon Vanguard Total is expected to generate 1.52 times less return on investment than California High-yield. In addition to that, Vanguard Total is 1.38 times more volatile than California High Yield Municipal. It trades about 0.04 of its total potential returns per unit of risk. California High Yield Municipal is currently generating about 0.09 per unit of volatility. If you would invest 905.00 in California High Yield Municipal on August 31, 2024 and sell it today you would earn a total of 90.00 from holding California High Yield Municipal or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. California High Yield Municipa
Performance |
| Timeline |
| Vanguard Total Bond |
| California High Yield |
Vanguard Total and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and California High-yield
The main advantage of trading using opposite Vanguard Total and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, California High-yield 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 California High-yield will offset losses from the drop in California High-yield's long position.| Vanguard Total vs. Absolute Convertible Arbitrage | Vanguard Total vs. Gabelli Convertible And | Vanguard Total vs. Calamos Dynamic Convertible | Vanguard Total vs. Columbia Vertible Securities |
| California High-yield vs. Ab All Market | California High-yield vs. Aqr Long Short Equity | California High-yield vs. Pnc Emerging Markets | California High-yield vs. Barings Emerging Markets |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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