Correlation Between Vanguard Intermediate and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate and Vanguard Total 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 Vanguard Total 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 Total World, you can compare the effects of market volatilities on Vanguard Intermediate and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and Vanguard Total.
Diversification Opportunities for Vanguard Intermediate and Vanguard Total
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tre and Vanguard Total World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total World 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 Treasury are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total World has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Vanguard Total go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and Vanguard Total
Given the investment horizon of 90 days Vanguard Intermediate is expected to generate 1.39 times less return on investment than Vanguard Total. In addition to that, Vanguard Intermediate is 1.08 times more volatile than Vanguard Total World. It trades about 0.03 of its total potential returns per unit of risk. Vanguard Total World is currently generating about 0.05 per unit of volatility. If you would invest 6,323 in Vanguard Total World on November 5, 2024 and sell it today you would earn a total of 525.00 from holding Vanguard Total World or generate 8.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Intermediate Term Tre vs. Vanguard Total World
Performance |
| Timeline |
| Vanguard Intermediate |
| Vanguard Total World |
Vanguard Intermediate and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and Vanguard Total
The main advantage of trading using opposite Vanguard Intermediate and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate position performs unexpectedly, Vanguard Total 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 Total will offset losses from the drop in Vanguard Total's long position.The idea behind Vanguard Intermediate Term Treasury and Vanguard Total World 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.
| Vanguard Total vs. Vanguard Total Corporate | Vanguard Total vs. Vanguard Emerging Markets | Vanguard Total vs. Vanguard Intermediate Term Treasury | Vanguard Total vs. Vanguard Total International |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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