Correlation Between Vanguard Total and Schwab Municipal
Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Schwab Municipal 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 Schwab Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total Corporate and Schwab Municipal Bond, you can compare the effects of market volatilities on Vanguard Total and Schwab Municipal 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 Schwab Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Schwab Municipal.
Diversification Opportunities for Vanguard Total and Schwab Municipal
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Schwab is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Corporate and Schwab Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Municipal 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 Corporate are associated (or correlated) with Schwab Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Municipal Bond has no effect on the direction of Vanguard Total i.e., Vanguard Total and Schwab Municipal go up and down completely randomly.
Pair Corralation between Vanguard Total and Schwab Municipal
Considering the 90-day investment horizon Vanguard Total Corporate is expected to generate 1.32 times more return on investment than Schwab Municipal. However, Vanguard Total is 1.32 times more volatile than Schwab Municipal Bond. It trades about 0.1 of its potential returns per unit of risk. Schwab Municipal Bond is currently generating about 0.13 per unit of risk. If you would invest 7,433 in Vanguard Total Corporate on September 1, 2024 and sell it today you would earn a total of 347.00 from holding Vanguard Total Corporate or generate 4.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard Total Corporate vs. Schwab Municipal Bond
Performance |
| Timeline |
| Vanguard Total Corporate |
| Schwab Municipal Bond |
Vanguard Total and Schwab Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Schwab Municipal
The main advantage of trading using opposite Vanguard Total and Schwab Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Schwab Municipal 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 Schwab Municipal will offset losses from the drop in Schwab Municipal's long position.| Vanguard Total vs. Vanguard Total World | Vanguard Total vs. Vanguard Long Term Corporate | Vanguard Total vs. Vanguard Emerging Markets | Vanguard Total vs. Vanguard Mortgage Backed Securities |
| Schwab Municipal vs. Vanguard Tax Exempt Bond | Schwab Municipal vs. Vanguard Short Term Tax Exempt | Schwab Municipal vs. PIMCO Intermediate Municipal | Schwab Municipal vs. Schwab Long Term Treasury |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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