Correlation Between Vanguard Long-term and Vanguard Extended
Can any of the company-specific risk be diversified away by investing in both Vanguard Long-term and Vanguard Extended 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 Long-term and Vanguard Extended into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Long Term Government and Vanguard Extended Duration, you can compare the effects of market volatilities on Vanguard Long-term and Vanguard Extended 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 Long-term with a short position of Vanguard Extended. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long-term and Vanguard Extended.
Diversification Opportunities for Vanguard Long-term and Vanguard Extended
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Government and Vanguard Extended Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Extended and Vanguard Long-term 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 Long Term Government are associated (or correlated) with Vanguard Extended. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Extended has no effect on the direction of Vanguard Long-term i.e., Vanguard Long-term and Vanguard Extended go up and down completely randomly.
Pair Corralation between Vanguard Long-term and Vanguard Extended
Assuming the 90 days horizon Vanguard Long-term is expected to generate 1.89 times less return on investment than Vanguard Extended. But when comparing it to its historical volatility, Vanguard Long Term Government is 1.7 times less risky than Vanguard Extended. It trades about 0.08 of its potential returns per unit of risk. Vanguard Extended Duration is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,201 in Vanguard Extended Duration on September 3, 2024 and sell it today you would earn a total of 56.00 from holding Vanguard Extended Duration or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Long Term Government vs. Vanguard Extended Duration
Performance |
| Timeline |
| Vanguard Long Term |
| Vanguard Extended |
Vanguard Long-term and Vanguard Extended Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Long-term and Vanguard Extended
The main advantage of trading using opposite Vanguard Long-term and Vanguard Extended positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long-term position performs unexpectedly, Vanguard Extended 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 Extended will offset losses from the drop in Vanguard Extended's long position.The idea behind Vanguard Long Term Government and Vanguard Extended Duration 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 Extended vs. Fidelity Series Long Term | Vanguard Extended vs. Vanguard Long Term Government | Vanguard Extended vs. Us Treasury Long Term | Vanguard Extended vs. Us Treasury Long Term |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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