Correlation Between Vanguard STAR and Vanguard Bond
Can any of the company-specific risk be diversified away by investing in both Vanguard STAR and Vanguard Bond 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 STAR and Vanguard Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard STAR Funds and Vanguard Bond Index, you can compare the effects of market volatilities on Vanguard STAR and Vanguard Bond 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 STAR with a short position of Vanguard Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard STAR and Vanguard Bond.
Diversification Opportunities for Vanguard STAR and Vanguard Bond
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vanguard and Vanguard is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and Vanguard Bond Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Bond Index and Vanguard STAR 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 STAR Funds are associated (or correlated) with Vanguard Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Bond Index has no effect on the direction of Vanguard STAR i.e., Vanguard STAR and Vanguard Bond go up and down completely randomly.
Pair Corralation between Vanguard STAR and Vanguard Bond
Assuming the 90 days trading horizon Vanguard STAR is expected to generate 1.06 times less return on investment than Vanguard Bond. But when comparing it to its historical volatility, Vanguard STAR Funds is 1.47 times less risky than Vanguard Bond. It trades about 0.09 of its potential returns per unit of risk. Vanguard Bond Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 118,429 in Vanguard Bond Index on August 25, 2024 and sell it today you would earn a total of 28,721 from holding Vanguard Bond Index or generate 24.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.43% |
| Values | Daily Returns |
Vanguard STAR Funds vs. Vanguard Bond Index
Performance |
| Timeline |
| Vanguard STAR Funds |
| Vanguard Bond Index |
Vanguard STAR and Vanguard Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard STAR and Vanguard Bond
The main advantage of trading using opposite Vanguard STAR and Vanguard Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard STAR position performs unexpectedly, Vanguard Bond 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 Vanguard Bond will offset losses from the drop in Vanguard Bond's long position.| Vanguard STAR vs. Vanguard Index Funds | Vanguard STAR vs. Vanguard Index Funds | Vanguard STAR vs. SPDR SP 500 | Vanguard STAR vs. iShares Trust |
| Vanguard Bond vs. Vanguard Index Funds | Vanguard Bond vs. Vanguard Index Funds | Vanguard Bond vs. SPDR SP 500 | Vanguard Bond vs. iShares Trust |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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