Correlation Between Vanguard Inflation and Vanguard Energy
Can any of the company-specific risk be diversified away by investing in both Vanguard Inflation and Vanguard Energy 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 Inflation and Vanguard Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Inflation Protected Securities and Vanguard Energy Fund, you can compare the effects of market volatilities on Vanguard Inflation and Vanguard Energy 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 Inflation with a short position of Vanguard Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Inflation and Vanguard Energy.
Diversification Opportunities for Vanguard Inflation and Vanguard Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Vanguard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Inflation Protected S and Vanguard Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy and Vanguard Inflation 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 Inflation Protected Securities are associated (or correlated) with Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy has no effect on the direction of Vanguard Inflation i.e., Vanguard Inflation and Vanguard Energy go up and down completely randomly.
Pair Corralation between Vanguard Inflation and Vanguard Energy
Assuming the 90 days horizon Vanguard Inflation Protected Securities is expected to generate 0.17 times more return on investment than Vanguard Energy. However, Vanguard Inflation Protected Securities is 5.76 times less risky than Vanguard Energy. It trades about -0.03 of its potential returns per unit of risk. Vanguard Energy Fund is currently generating about -0.11 per unit of risk. If you would invest 1,158 in Vanguard Inflation Protected Securities on October 26, 2024 and sell it today you would lose (5.00) from holding Vanguard Inflation Protected Securities or give up 0.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Inflation Protected S vs. Vanguard Energy Fund
Performance |
| Timeline |
| Vanguard Inflation |
| Vanguard Energy |
Vanguard Inflation and Vanguard Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Inflation and Vanguard Energy
The main advantage of trading using opposite Vanguard Inflation and Vanguard Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Inflation position performs unexpectedly, Vanguard Energy 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 Energy will offset losses from the drop in Vanguard Energy's long position.| Vanguard Inflation vs. Vanguard Short Term Investment Grade | Vanguard Inflation vs. Vanguard High Yield Porate | Vanguard Inflation vs. Vanguard Gnma Fund | Vanguard Inflation vs. Vanguard Reit Index |
| Vanguard Energy vs. Vanguard Global Capital | Vanguard Energy vs. Vanguard Health Care | Vanguard Energy vs. Vanguard Reit Index | Vanguard Energy vs. Vanguard Emerging Markets |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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