Correlation Between Vanguard High-yield and Northern High
Can any of the company-specific risk be diversified away by investing in both Vanguard High-yield and Northern High 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 Northern High 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 Northern High Yield, you can compare the effects of market volatilities on Vanguard High-yield and Northern High 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 Northern High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High-yield and Northern High.
Diversification Opportunities for Vanguard High-yield and Northern High
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and Northern is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Corporate and Northern High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern High Yield 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 Northern High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern High Yield has no effect on the direction of Vanguard High-yield i.e., Vanguard High-yield and Northern High go up and down completely randomly.
Pair Corralation between Vanguard High-yield and Northern High
Assuming the 90 days horizon Vanguard High Yield Corporate is expected to generate 0.98 times more return on investment than Northern High. However, Vanguard High Yield Corporate is 1.02 times less risky than Northern High. It trades about 0.21 of its potential returns per unit of risk. Northern High Yield is currently generating about 0.04 per unit of risk. If you would invest 543.00 in Vanguard High Yield Corporate on August 29, 2024 and sell it today you would earn a total of 4.00 from holding Vanguard High Yield Corporate or generate 0.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard High Yield Corporate vs. Northern High Yield
Performance |
| Timeline |
| Vanguard High Yield |
| Northern High Yield |
Vanguard High-yield and Northern High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High-yield and Northern High
The main advantage of trading using opposite Vanguard High-yield and Northern High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High-yield position performs unexpectedly, Northern High 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 Northern High will offset losses from the drop in Northern High's long position.| Vanguard High-yield vs. Prudential High Yield | Vanguard High-yield vs. HUMANA INC | Vanguard High-yield vs. Aquagold International | Vanguard High-yield vs. Barloworld Ltd ADR |
| Northern High vs. Northern Emerging Markets | Northern High vs. Northern Global Real | Northern High vs. Northern International Equity | Northern High vs. Northern Small Cap |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |