Correlation Between Vanguard Intermediate and VanEck Vectors
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate and VanEck Vectors 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 Intermediate and VanEck Vectors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Intermediate Term Corporate and VanEck Vectors Moodys, you can compare the effects of market volatilities on Vanguard Intermediate and VanEck Vectors 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 Intermediate with a short position of VanEck Vectors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and VanEck Vectors.
Diversification Opportunities for Vanguard Intermediate and VanEck Vectors
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and VanEck is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Cor and VanEck Vectors Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors Moodys and Vanguard Intermediate 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 Intermediate Term Corporate are associated (or correlated) with VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors Moodys has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and VanEck Vectors go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and VanEck Vectors
Given the investment horizon of 90 days Vanguard Intermediate is expected to generate 1.03 times less return on investment than VanEck Vectors. But when comparing it to its historical volatility, Vanguard Intermediate Term Corporate is 1.01 times less risky than VanEck Vectors. It trades about 0.05 of its potential returns per unit of risk. VanEck Vectors Moodys is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,113 in VanEck Vectors Moodys on October 20, 2024 and sell it today you would earn a total of 6.00 from holding VanEck Vectors Moodys or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Vanguard Intermediate Term Cor vs. VanEck Vectors Moodys
Performance |
| Timeline |
| Vanguard Intermediate |
| VanEck Vectors Moodys |
Vanguard Intermediate and VanEck Vectors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and VanEck Vectors
The main advantage of trading using opposite Vanguard Intermediate and VanEck Vectors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate position performs unexpectedly, VanEck Vectors 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 VanEck Vectors will offset losses from the drop in VanEck Vectors' long position.The idea behind Vanguard Intermediate Term Corporate and VanEck Vectors Moodys 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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