Correlation Between Vanguard High-yield and High-yield Fund
Can any of the company-specific risk be diversified away by investing in both Vanguard High-yield and High-yield Fund 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 Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard High Yield Porate and High Yield Fund I, you can compare the effects of market volatilities on Vanguard High-yield and High-yield Fund 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 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard High-yield and High-yield Fund.
Diversification Opportunities for Vanguard High-yield and High-yield Fund
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and High-yield is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard High Yield Porate and High Yield Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund 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 Porate are associated (or correlated) with High-yield Fund. 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 Fund has no effect on the direction of Vanguard High-yield i.e., Vanguard High-yield and High-yield Fund go up and down completely randomly.
Pair Corralation between Vanguard High-yield and High-yield Fund
Assuming the 90 days horizon Vanguard High-yield is expected to generate 1.24 times less return on investment than High-yield Fund. But when comparing it to its historical volatility, Vanguard High Yield Porate is 1.1 times less risky than High-yield Fund. It trades about 0.12 of its potential returns per unit of risk. High Yield Fund I is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 508.00 in High Yield Fund I on September 2, 2024 and sell it today you would earn a total of 7.00 from holding High Yield Fund I or generate 1.38% 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 Porate vs. High Yield Fund I
Performance |
| Timeline |
| Vanguard High Yield |
| High Yield Fund |
Vanguard High-yield and High-yield Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard High-yield and High-yield Fund
The main advantage of trading using opposite Vanguard High-yield and High-yield Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard High-yield position performs unexpectedly, High-yield Fund 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 Fund will offset losses from the drop in High-yield Fund's long position.The idea behind Vanguard High Yield Porate and High Yield Fund I 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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