Correlation Between Vanguard Total and Total Return
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Total Return 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 Total and Total Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Bond and Total Return Bond, you can compare the effects of market volatilities on Vanguard Total and Total Return 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 Total with a short position of Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Total Return.
Diversification Opportunities for Vanguard Total and Total Return
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Vanguard and Total is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond and Vanguard Total 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 Total Bond are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Vanguard Total i.e., Vanguard Total and Total Return go up and down completely randomly.
Pair Corralation between Vanguard Total and Total Return
Assuming the 90 days horizon Vanguard Total Bond is expected to under-perform the Total Return. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 1.02 times less risky than Total Return. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Total Return Bond is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 1,132 in Total Return Bond on September 12, 2024 and sell it today you would lose (21.00) from holding Total Return Bond or give up 1.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Total Bond vs. Total Return Bond
Performance |
| Timeline |
| Vanguard Total Bond |
| Total Return Bond |
Vanguard Total and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Total Return
The main advantage of trading using opposite Vanguard Total and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| Vanguard Total vs. Ab Government Exchange | Vanguard Total vs. Hewitt Money Market | Vanguard Total vs. Cref Money Market | Vanguard Total vs. Edward Jones Money |
| Total Return vs. Alliancebernstein Global High | Total Return vs. Ab Global Risk | Total Return vs. Morningstar Global Income | Total Return vs. Siit Global Managed |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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