Correlation Between Vanguard Developed and Wilmington Intermediate-ter
Can any of the company-specific risk be diversified away by investing in both Vanguard Developed and Wilmington 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 Developed and Wilmington Intermediate-ter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Developed Markets and Wilmington Intermediate Term Bond, you can compare the effects of market volatilities on Vanguard Developed and Wilmington 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 Developed with a short position of Wilmington Intermediate-ter. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Wilmington Intermediate-ter.
Diversification Opportunities for Vanguard Developed and Wilmington Intermediate-ter
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Wilmington is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Wilmington Intermediate Term B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Intermediate-ter and Vanguard Developed 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 Developed Markets are associated (or correlated) with Wilmington 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 Wilmington Intermediate-ter has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and Wilmington Intermediate-ter go up and down completely randomly.
Pair Corralation between Vanguard Developed and Wilmington Intermediate-ter
Assuming the 90 days horizon Vanguard Developed is expected to generate 1.3 times less return on investment than Wilmington Intermediate-ter. In addition to that, Vanguard Developed is 1.07 times more volatile than Wilmington Intermediate Term Bond. It trades about 0.04 of its total potential returns per unit of risk. Wilmington Intermediate Term Bond is currently generating about 0.05 per unit of volatility. If you would invest 1,004 in Wilmington Intermediate Term Bond on August 30, 2024 and sell it today you would earn a total of 152.00 from holding Wilmington Intermediate Term Bond or generate 15.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.22% |
| Values | Daily Returns |
Vanguard Developed Markets vs. Wilmington Intermediate Term B
Performance |
| Timeline |
| Vanguard Developed |
| Wilmington Intermediate-ter |
Vanguard Developed and Wilmington Intermediate-ter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Developed and Wilmington Intermediate-ter
The main advantage of trading using opposite Vanguard Developed and Wilmington Intermediate-ter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Developed position performs unexpectedly, Wilmington 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 Wilmington Intermediate-ter will offset losses from the drop in Wilmington Intermediate-ter's long position.| Vanguard Developed vs. Vanguard Emerging Markets | Vanguard Developed vs. Vanguard Small Cap Index | Vanguard Developed vs. Vanguard Total Bond | Vanguard Developed vs. Vanguard Mid Cap Index |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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