Correlation Between Vanguard Inflation-protec and Vanguard High-yield
Can any of the company-specific risk be diversified away by investing in both Vanguard Inflation-protec and Vanguard High-yield 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-protec and Vanguard High-yield 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 High Yield Corporate, you can compare the effects of market volatilities on Vanguard Inflation-protec and Vanguard High-yield 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-protec with a short position of Vanguard High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Inflation-protec and Vanguard High-yield.
Diversification Opportunities for Vanguard Inflation-protec and Vanguard High-yield
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Vanguard and Vanguard is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Inflation Protected S and Vanguard High Yield Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield and Vanguard Inflation-protec 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 High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of Vanguard Inflation-protec i.e., Vanguard Inflation-protec and Vanguard High-yield go up and down completely randomly.
Pair Corralation between Vanguard Inflation-protec and Vanguard High-yield
Assuming the 90 days horizon Vanguard Inflation-protec is expected to generate 3.03 times less return on investment than Vanguard High-yield. In addition to that, Vanguard Inflation-protec is 1.22 times more volatile than Vanguard High Yield Corporate. It trades about 0.03 of its total potential returns per unit of risk. Vanguard High Yield Corporate is currently generating about 0.11 per unit of volatility. If you would invest 465.00 in Vanguard High Yield Corporate on August 30, 2024 and sell it today you would earn a total of 82.00 from holding Vanguard High Yield Corporate or generate 17.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Inflation Protected S vs. Vanguard High Yield Corporate
Performance |
| Timeline |
| Vanguard Inflation-protec |
| Vanguard High Yield |
Vanguard Inflation-protec and Vanguard High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Inflation-protec and Vanguard High-yield
The main advantage of trading using opposite Vanguard Inflation-protec and Vanguard High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Inflation-protec position performs unexpectedly, Vanguard High-yield 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 High-yield will offset losses from the drop in Vanguard High-yield's long position.The idea behind Vanguard Inflation Protected Securities and Vanguard High Yield Corporate 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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