Correlation Between Vanguard Tax and Avantis Core
Can any of the company-specific risk be diversified away by investing in both Vanguard Tax and Avantis Core 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 Tax and Avantis Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Tax Exempt Bond and Avantis Core Municipal, you can compare the effects of market volatilities on Vanguard Tax and Avantis Core 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 Tax with a short position of Avantis Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Tax and Avantis Core.
Diversification Opportunities for Vanguard Tax and Avantis Core
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Avantis is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Tax Exempt Bond and Avantis Core Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Core Municipal and Vanguard Tax 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 Tax Exempt Bond are associated (or correlated) with Avantis Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Core Municipal has no effect on the direction of Vanguard Tax i.e., Vanguard Tax and Avantis Core go up and down completely randomly.
Pair Corralation between Vanguard Tax and Avantis Core
Given the investment horizon of 90 days Vanguard Tax is expected to generate 1.19 times less return on investment than Avantis Core. In addition to that, Vanguard Tax is 1.04 times more volatile than Avantis Core Municipal. It trades about 0.06 of its total potential returns per unit of risk. Avantis Core Municipal is currently generating about 0.08 per unit of volatility. If you would invest 4,627 in Avantis Core Municipal on August 31, 2024 and sell it today you would earn a total of 57.00 from holding Avantis Core Municipal or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Tax Exempt Bond vs. Avantis Core Municipal
Performance |
| Timeline |
| Vanguard Tax Exempt |
| Avantis Core Municipal |
Vanguard Tax and Avantis Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Tax and Avantis Core
The main advantage of trading using opposite Vanguard Tax and Avantis Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Tax position performs unexpectedly, Avantis Core 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 Avantis Core will offset losses from the drop in Avantis Core's long position.| Vanguard Tax vs. iShares National Muni | Vanguard Tax vs. Vanguard Short Term Inflation Protected | Vanguard Tax vs. Vanguard Intermediate Term Corporate | Vanguard Tax vs. Vanguard Short Term Treasury |
| Avantis Core vs. Avantis Core Fixed | Avantis Core vs. American Century ETF | Avantis Core vs. American Century Diversified | Avantis Core vs. IQ MacKay Municipal |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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