Correlation Between Vanguard High and California Bond
Can any of the company-specific risk be diversified away by investing in both Vanguard High and California Bond 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 and California Bond 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 California Bond Fund, you can compare the effects of market volatilities on Vanguard High and California Bond 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 with a short position of California Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High and California Bond.
Diversification Opportunities for Vanguard High and California Bond
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and California is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Tax Exempt and California Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Bond and Vanguard High 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 California Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Bond has no effect on the direction of Vanguard High i.e., Vanguard High and California Bond go up and down completely randomly.
Pair Corralation between Vanguard High and California Bond
Assuming the 90 days horizon Vanguard High Yield Tax Exempt is expected to generate 1.18 times more return on investment than California Bond. However, Vanguard High is 1.18 times more volatile than California Bond Fund. It trades about 0.18 of its potential returns per unit of risk. California Bond Fund is currently generating about 0.16 per unit of risk. If you would invest 956.00 in Vanguard High Yield Tax Exempt on September 1, 2024 and sell it today you would earn a total of 128.00 from holding Vanguard High Yield Tax Exempt or generate 13.39% 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. California Bond Fund
Performance |
| Timeline |
| Vanguard High Yield |
| California Bond |
Vanguard High and California Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High and California Bond
The main advantage of trading using opposite Vanguard High and California Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High position performs unexpectedly, California Bond 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 California Bond will offset losses from the drop in California Bond's long position.| Vanguard High vs. Vanguard Intermediate Term Tax Exempt | Vanguard High vs. Vanguard Long Term Tax Exempt | Vanguard High vs. Vanguard High Yield Corporate | Vanguard High vs. Vanguard Limited Term Tax Exempt |
| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Usaa Intermediate Term |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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