Correlation Between Vanguard Intermediate-ter and Vanguard Large-cap
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate-ter and Vanguard Large-cap 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-ter and Vanguard Large-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Intermediate Term Treasury and Vanguard Large Cap Index, you can compare the effects of market volatilities on Vanguard Intermediate-ter and Vanguard Large-cap 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-ter with a short position of Vanguard Large-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate-ter and Vanguard Large-cap.
Diversification Opportunities for Vanguard Intermediate-ter and Vanguard Large-cap
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vanguard and Vanguard is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tre and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap and Vanguard Intermediate-ter 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 Treasury are associated (or correlated) with Vanguard Large-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of Vanguard Intermediate-ter i.e., Vanguard Intermediate-ter and Vanguard Large-cap go up and down completely randomly.
Pair Corralation between Vanguard Intermediate-ter and Vanguard Large-cap
Assuming the 90 days horizon Vanguard Intermediate-ter is expected to generate 14.39 times less return on investment than Vanguard Large-cap. But when comparing it to its historical volatility, Vanguard Intermediate Term Treasury is 2.32 times less risky than Vanguard Large-cap. It trades about 0.06 of its potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 54,304 in Vanguard Large Cap Index on September 1, 2024 and sell it today you would earn a total of 3,311 from holding Vanguard Large Cap Index or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Intermediate Term Tre vs. Vanguard Large Cap Index
Performance |
| Timeline |
| Vanguard Intermediate-ter |
| Vanguard Large Cap |
Vanguard Intermediate-ter and Vanguard Large-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate-ter and Vanguard Large-cap
The main advantage of trading using opposite Vanguard Intermediate-ter and Vanguard Large-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate-ter position performs unexpectedly, Vanguard Large-cap 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 Vanguard Large-cap will offset losses from the drop in Vanguard Large-cap's long position.The idea behind Vanguard Intermediate Term Treasury and Vanguard Large Cap Index 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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