Correlation Between Vanguard High-yield and Northeast Investors
Can any of the company-specific risk be diversified away by investing in both Vanguard High-yield and Northeast Investors 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 Northeast Investors 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 Northeast Investors Trust, you can compare the effects of market volatilities on Vanguard High-yield and Northeast Investors 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 Northeast Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High-yield and Northeast Investors.
Diversification Opportunities for Vanguard High-yield and Northeast Investors
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and Northeast is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Corporate and Northeast Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Investors Trust 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 Northeast Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Investors Trust has no effect on the direction of Vanguard High-yield i.e., Vanguard High-yield and Northeast Investors go up and down completely randomly.
Pair Corralation between Vanguard High-yield and Northeast Investors
Assuming the 90 days horizon Vanguard High-yield is expected to generate 1.51 times less return on investment than Northeast Investors. But when comparing it to its historical volatility, Vanguard High Yield Corporate is 2.21 times less risky than Northeast Investors. It trades about 0.12 of its potential returns per unit of risk. Northeast Investors Trust is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 361.00 in Northeast Investors Trust on September 3, 2024 and sell it today you would earn a total of 6.00 from holding Northeast Investors Trust or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard High Yield Corporate vs. Northeast Investors Trust
Performance |
| Timeline |
| Vanguard High Yield |
| Northeast Investors Trust |
Vanguard High-yield and Northeast Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High-yield and Northeast Investors
The main advantage of trading using opposite Vanguard High-yield and Northeast Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High-yield position performs unexpectedly, Northeast Investors 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 Northeast Investors will offset losses from the drop in Northeast Investors' long position.The idea behind Vanguard High Yield Corporate and Northeast Investors Trust 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.
| Northeast Investors vs. Vanguard High Yield Corporate | Northeast Investors vs. Vanguard High Yield Porate | Northeast Investors vs. Blackrock Hi Yld | Northeast Investors vs. Blackrock High Yield |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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