Correlation Between Vanguard Mid-cap and Vanguard Intermediate-ter
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid-cap and Vanguard Intermediate-ter 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 Mid-cap and Vanguard Intermediate-ter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Value and Vanguard Intermediate Term Treasury, you can compare the effects of market volatilities on Vanguard Mid-cap and Vanguard Intermediate-ter 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 Mid-cap with a short position of Vanguard Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid-cap and Vanguard Intermediate-ter.
Diversification Opportunities for Vanguard Mid-cap and Vanguard Intermediate-ter
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Vanguard is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Value and Vanguard Intermediate Term Tre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate-ter and Vanguard Mid-cap 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 Mid Cap Value are associated (or correlated) with Vanguard Intermediate-ter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate-ter has no effect on the direction of Vanguard Mid-cap i.e., Vanguard Mid-cap and Vanguard Intermediate-ter go up and down completely randomly.
Pair Corralation between Vanguard Mid-cap and Vanguard Intermediate-ter
Assuming the 90 days horizon Vanguard Mid Cap Value is expected to generate 2.21 times more return on investment than Vanguard Intermediate-ter. However, Vanguard Mid-cap is 2.21 times more volatile than Vanguard Intermediate Term Treasury. It trades about 0.4 of its potential returns per unit of risk. Vanguard Intermediate Term Treasury is currently generating about 0.06 per unit of risk. If you would invest 6,534 in Vanguard Mid Cap Value on September 1, 2024 and sell it today you would earn a total of 400.00 from holding Vanguard Mid Cap Value or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Value vs. Vanguard Intermediate Term Tre
Performance |
| Timeline |
| Vanguard Mid Cap |
| Vanguard Intermediate-ter |
Vanguard Mid-cap and Vanguard Intermediate-ter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid-cap and Vanguard Intermediate-ter
The main advantage of trading using opposite Vanguard Mid-cap and Vanguard Intermediate-ter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid-cap position performs unexpectedly, Vanguard Intermediate-ter 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 Intermediate-ter will offset losses from the drop in Vanguard Intermediate-ter's long position.| Vanguard Mid-cap vs. Goldman Sachs Financial | Vanguard Mid-cap vs. Royce Global Financial | Vanguard Mid-cap vs. 1919 Financial Services | Vanguard Mid-cap vs. Angel Oak Financial |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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