Correlation Between Vanguard Financials and Moderate Duration
Can any of the company-specific risk be diversified away by investing in both Vanguard Financials and Moderate Duration 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 Financials and Moderate Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Financials Index and Moderate Duration Fund, you can compare the effects of market volatilities on Vanguard Financials and Moderate Duration 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 Financials with a short position of Moderate Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Financials and Moderate Duration.
Diversification Opportunities for Vanguard Financials and Moderate Duration
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Moderate is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and Moderate Duration Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Duration and Vanguard Financials 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 Financials Index are associated (or correlated) with Moderate Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Duration has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and Moderate Duration go up and down completely randomly.
Pair Corralation between Vanguard Financials and Moderate Duration
If you would invest 5,934 in Vanguard Financials Index on October 22, 2024 and sell it today you would earn a total of 219.00 from holding Vanguard Financials Index or generate 3.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 5.56% |
| Values | Daily Returns |
Vanguard Financials Index vs. Moderate Duration Fund
Performance |
| Timeline |
| Vanguard Financials Index |
| Moderate Duration |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Vanguard Financials and Moderate Duration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Financials and Moderate Duration
The main advantage of trading using opposite Vanguard Financials and Moderate Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials position performs unexpectedly, Moderate Duration 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 Moderate Duration will offset losses from the drop in Moderate Duration's long position.The idea behind Vanguard Financials Index and Moderate Duration Fund 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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