Correlation Between Vanguard High-yield and High-yield Municipal
Can any of the company-specific risk be diversified away by investing in both Vanguard High-yield and High-yield 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 High-yield and High-yield Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard High Yield Corporate and High Yield Municipal Fund, you can compare the effects of market volatilities on Vanguard High-yield and High-yield 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 High-yield with a short position of High-yield Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High-yield and High-yield Municipal.
Diversification Opportunities for Vanguard High-yield and High-yield Municipal
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and High-yield is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Corporate and High Yield Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Municipal 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 Corporate are associated (or correlated) with High-yield Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Municipal has no effect on the direction of Vanguard High-yield i.e., Vanguard High-yield and High-yield Municipal go up and down completely randomly.
Pair Corralation between Vanguard High-yield and High-yield Municipal
Assuming the 90 days horizon Vanguard High Yield Corporate is expected to generate 0.68 times more return on investment than High-yield Municipal. However, Vanguard High Yield Corporate is 1.47 times less risky than High-yield Municipal. It trades about 0.19 of its potential returns per unit of risk. High Yield Municipal Fund is currently generating about 0.1 per unit of risk. If you would invest 513.00 in Vanguard High Yield Corporate on November 28, 2024 and sell it today you would earn a total of 34.00 from holding Vanguard High Yield Corporate or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard High Yield Corporate vs. High Yield Municipal Fund
Performance |
| Timeline |
| Vanguard High Yield |
| High Yield Municipal |
Vanguard High-yield and High-yield Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High-yield and High-yield Municipal
The main advantage of trading using opposite Vanguard High-yield and High-yield Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High-yield position performs unexpectedly, High-yield 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 High-yield Municipal will offset losses from the drop in High-yield Municipal's long position.The idea behind Vanguard High Yield Corporate and High Yield Municipal Fund 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.
| High-yield Municipal vs. High Yield Fund Investor | High-yield Municipal vs. Intermediate Term Tax Free Bond | High-yield Municipal vs. California High Yield Municipal | High-yield Municipal vs. T Rowe Price |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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