Correlation Between Vanguard High-yield and Managed Volatility
Can any of the company-specific risk be diversified away by investing in both Vanguard High-yield and Managed Volatility 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 Managed Volatility 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 Managed Volatility Fund, you can compare the effects of market volatilities on Vanguard High-yield and Managed Volatility 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 Managed Volatility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High-yield and Managed Volatility.
Diversification Opportunities for Vanguard High-yield and Managed Volatility
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Managed is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Corporate and Managed Volatility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Volatility 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 Managed Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Volatility has no effect on the direction of Vanguard High-yield i.e., Vanguard High-yield and Managed Volatility go up and down completely randomly.
Pair Corralation between Vanguard High-yield and Managed Volatility
Assuming the 90 days horizon Vanguard High Yield Corporate is expected to generate 5.22 times more return on investment than Managed Volatility. However, Vanguard High-yield is 5.22 times more volatile than Managed Volatility Fund. It trades about 0.18 of its potential returns per unit of risk. Managed Volatility Fund is currently generating about 0.32 per unit of risk. If you would invest 545.00 in Vanguard High Yield Corporate on September 1, 2024 and sell it today you would earn a total of 3.00 from holding Vanguard High Yield Corporate or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard High Yield Corporate vs. Managed Volatility Fund
Performance |
| Timeline |
| Vanguard High Yield |
| Managed Volatility |
Vanguard High-yield and Managed Volatility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High-yield and Managed Volatility
The main advantage of trading using opposite Vanguard High-yield and Managed Volatility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High-yield position performs unexpectedly, Managed Volatility 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 Managed Volatility will offset losses from the drop in Managed Volatility's long position.The idea behind Vanguard High Yield Corporate and Managed Volatility 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.
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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