Correlation Between Vanguard Short-term and Calvert Short
Can any of the company-specific risk be diversified away by investing in both Vanguard Short-term and Calvert Short 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 Short-term and Calvert Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Short Term Investment Grade and Calvert Short Duration, you can compare the effects of market volatilities on Vanguard Short-term and Calvert Short 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 Short-term with a short position of Calvert Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short-term and Calvert Short.
Diversification Opportunities for Vanguard Short-term and Calvert Short
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Calvert is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Investment and Calvert Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Short Duration and Vanguard Short-term 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 Short Term Investment Grade are associated (or correlated) with Calvert Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Short Duration has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Calvert Short go up and down completely randomly.
Pair Corralation between Vanguard Short-term and Calvert Short
Assuming the 90 days horizon Vanguard Short Term Investment Grade is expected to under-perform the Calvert Short. In addition to that, Vanguard Short-term is 1.29 times more volatile than Calvert Short Duration. It trades about -0.14 of its total potential returns per unit of risk. Calvert Short Duration is currently generating about -0.05 per unit of volatility. If you would invest 1,554 in Calvert Short Duration on August 24, 2024 and sell it today you would lose (2.00) from holding Calvert Short Duration or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Investment vs. Calvert Short Duration
Performance |
| Timeline |
| Vanguard Short Term |
| Calvert Short Duration |
Vanguard Short-term and Calvert Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short-term and Calvert Short
The main advantage of trading using opposite Vanguard Short-term and Calvert Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short-term position performs unexpectedly, Calvert Short 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 Calvert Short will offset losses from the drop in Calvert Short's long position.The idea behind Vanguard Short Term Investment Grade and Calvert Short Duration 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.
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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