Correlation Between Vanguard Short and Short-term Government
Can any of the company-specific risk be diversified away by investing in both Vanguard Short and Short-term Government 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 Short and Short-term Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Short Term Federal and Short Term Government Fund, you can compare the effects of market volatilities on Vanguard Short and Short-term Government 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 Short with a short position of Short-term Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and Short-term Government.
Diversification Opportunities for Vanguard Short and Short-term Government
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Short-term is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Federal and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government and Vanguard Short 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 Short Term Federal are associated (or correlated) with Short-term Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Vanguard Short i.e., Vanguard Short and Short-term Government go up and down completely randomly.
Pair Corralation between Vanguard Short and Short-term Government
Assuming the 90 days horizon Vanguard Short Term Federal is expected to generate 1.12 times more return on investment than Short-term Government. However, Vanguard Short is 1.12 times more volatile than Short Term Government Fund. It trades about 0.17 of its potential returns per unit of risk. Short Term Government Fund is currently generating about 0.16 per unit of risk. If you would invest 982.00 in Vanguard Short Term Federal on August 23, 2024 and sell it today you would earn a total of 32.00 from holding Vanguard Short Term Federal or generate 3.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Short Term Federal vs. Short Term Government Fund
Performance |
| Timeline |
| Vanguard Short Term |
| Short Term Government |
Vanguard Short and Short-term Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Short and Short-term Government
The main advantage of trading using opposite Vanguard Short and Short-term Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Short position performs unexpectedly, Short-term Government 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 Short-term Government will offset losses from the drop in Short-term Government's long position.| Vanguard Short vs. Vanguard Short Term Treasury | Vanguard Short vs. Vanguard Intermediate Term Treasury | Vanguard Short vs. Vanguard Short Term Bond | Vanguard Short vs. Vanguard Long Term Treasury |
| Short-term Government vs. American Funds 2060 | Short-term Government vs. Fidelity Advisor Managed | Short-term Government vs. Oklahoma College Savings | Short-term Government vs. Jp Morgan Smartretirement |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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