Correlation Between Vanguard Intermediate and Western Asset
Can any of the company-specific risk be diversified away by investing in both Vanguard Intermediate and Western Asset 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 Intermediate and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Intermediate Term Tax Exempt and Western Asset Intermediate Term, you can compare the effects of market volatilities on Vanguard Intermediate and Western Asset 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 Intermediate with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and Western Asset.
Diversification Opportunities for Vanguard Intermediate and Western Asset
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Western is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tax and Western Asset Intermediate Ter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Interm and Vanguard Intermediate 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 Intermediate Term Tax Exempt are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Interm has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Western Asset go up and down completely randomly.
Pair Corralation between Vanguard Intermediate and Western Asset
Assuming the 90 days horizon Vanguard Intermediate Term Tax Exempt is expected to generate 0.98 times more return on investment than Western Asset. However, Vanguard Intermediate Term Tax Exempt is 1.02 times less risky than Western Asset. It trades about 0.44 of its potential returns per unit of risk. Western Asset Intermediate Term is currently generating about 0.29 per unit of risk. If you would invest 1,359 in Vanguard Intermediate Term Tax Exempt on September 13, 2024 and sell it today you would earn a total of 17.00 from holding Vanguard Intermediate Term Tax Exempt or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Intermediate Term Tax vs. Western Asset Intermediate Ter
Performance |
| Timeline |
| Vanguard Intermediate |
| Western Asset Interm |
Vanguard Intermediate and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Intermediate and Western Asset
The main advantage of trading using opposite Vanguard Intermediate and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Intermediate position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.The idea behind Vanguard Intermediate Term Tax Exempt and Western Asset Intermediate Term 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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