Correlation Between Vanguard High-yield and Deutsche Managed
Can any of the company-specific risk be diversified away by investing in both Vanguard High-yield and Deutsche Managed 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 High-yield and Deutsche Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard High Yield Tax Exempt and Deutsche Managed Municipal, you can compare the effects of market volatilities on Vanguard High-yield and Deutsche Managed 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 High-yield with a short position of Deutsche Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High-yield and Deutsche Managed.
Diversification Opportunities for Vanguard High-yield and Deutsche Managed
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between VANGUARD and Deutsche is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Tax Exempt and Deutsche Managed Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Managed Mun and Vanguard High-yield 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 High Yield Tax Exempt are associated (or correlated) with Deutsche Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Managed Mun has no effect on the direction of Vanguard High-yield i.e., Vanguard High-yield and Deutsche Managed go up and down completely randomly.
Pair Corralation between Vanguard High-yield and Deutsche Managed
Assuming the 90 days horizon Vanguard High-yield is expected to generate 1.1 times less return on investment than Deutsche Managed. In addition to that, Vanguard High-yield is 1.04 times more volatile than Deutsche Managed Municipal. It trades about 0.14 of its total potential returns per unit of risk. Deutsche Managed Municipal is currently generating about 0.16 per unit of volatility. If you would invest 812.00 in Deutsche Managed Municipal on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Deutsche Managed 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 High Yield Tax Exempt vs. Deutsche Managed Municipal
Performance |
| Timeline |
| Vanguard High Yield |
| Deutsche Managed Mun |
Vanguard High-yield and Deutsche Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High-yield and Deutsche Managed
The main advantage of trading using opposite Vanguard High-yield and Deutsche Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High-yield position performs unexpectedly, Deutsche Managed 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 Deutsche Managed will offset losses from the drop in Deutsche Managed's long position.The idea behind Vanguard High Yield Tax Exempt and Deutsche Managed Municipal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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