Correlation Between Vanguard Short and Schwab Aggregate
Can any of the company-specific risk be diversified away by investing in both Vanguard Short and Schwab Aggregate 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 and Schwab Aggregate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Short Term Treasury and Schwab Aggregate Bond, you can compare the effects of market volatilities on Vanguard Short and Schwab Aggregate 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 with a short position of Schwab Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and Schwab Aggregate.
Diversification Opportunities for Vanguard Short and Schwab Aggregate
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and Schwab is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Treasury and Schwab Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Aggregate Bond and Vanguard Short 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 Treasury are associated (or correlated) with Schwab Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Aggregate Bond has no effect on the direction of Vanguard Short i.e., Vanguard Short and Schwab Aggregate go up and down completely randomly.
Pair Corralation between Vanguard Short and Schwab Aggregate
Given the investment horizon of 90 days Vanguard Short is expected to generate 1.37 times less return on investment than Schwab Aggregate. But when comparing it to its historical volatility, Vanguard Short Term Treasury is 3.05 times less risky than Schwab Aggregate. It trades about 0.11 of its potential returns per unit of risk. Schwab Aggregate Bond is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,084 in Schwab Aggregate Bond on November 1, 2024 and sell it today you would earn a total of 204.00 from holding Schwab Aggregate Bond or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Treasury vs. Schwab Aggregate Bond
Performance |
| Timeline |
| Vanguard Short Term |
| Schwab Aggregate Bond |
Vanguard Short and Schwab Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short and Schwab Aggregate
The main advantage of trading using opposite Vanguard Short and Schwab Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short position performs unexpectedly, Schwab Aggregate 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 Schwab Aggregate will offset losses from the drop in Schwab Aggregate's long position.The idea behind Vanguard Short Term Treasury and Schwab Aggregate Bond 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.
| Schwab Aggregate vs. Schwab International Equity | Schwab Aggregate vs. Schwab Emerging Markets | Schwab Aggregate vs. Schwab Short Term Treasury | Schwab Aggregate vs. Schwab TIPS ETF |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins |