Correlation Between Vanguard Inflation-protec and Western Asset
Can any of the company-specific risk be diversified away by investing in both Vanguard Inflation-protec and Western Asset 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 Western Asset 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 Western Asset Inflation, you can compare the effects of market volatilities on Vanguard Inflation-protec and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Inflation-protec and Western Asset.
Diversification Opportunities for Vanguard Inflation-protec and Western Asset
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Western is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Inflation Protected S and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of Vanguard Inflation-protec i.e., Vanguard Inflation-protec and Western Asset go up and down completely randomly.
Pair Corralation between Vanguard Inflation-protec and Western Asset
Assuming the 90 days horizon Vanguard Inflation Protected Securities is expected to generate 1.04 times more return on investment than Western Asset. However, Vanguard Inflation-protec is 1.04 times more volatile than Western Asset Inflation. It trades about 0.06 of its potential returns per unit of risk. Western Asset Inflation is currently generating about -0.05 per unit of risk. If you would invest 1,178 in Vanguard Inflation Protected Securities on August 28, 2024 and sell it today you would earn a total of 4.00 from holding Vanguard Inflation Protected Securities or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Inflation Protected S vs. Western Asset Inflation
Performance |
| Timeline |
| Vanguard Inflation-protec |
| Western Asset Inflation |
Vanguard Inflation-protec and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Inflation-protec and Western Asset
The main advantage of trading using opposite Vanguard Inflation-protec and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Inflation-protec position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind Vanguard Inflation Protected Securities and Western Asset Inflation 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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