Correlation Between Municipal Bond and Vanguard Long-term
Can any of the company-specific risk be diversified away by investing in both Municipal Bond and Vanguard Long-term 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 Municipal Bond and Vanguard Long-term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Fund and Vanguard Long Term Tax Exempt, you can compare the effects of market volatilities on Municipal Bond and Vanguard Long-term 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 Municipal Bond with a short position of Vanguard Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Vanguard Long-term.
Diversification Opportunities for Municipal Bond and Vanguard Long-term
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Municipal and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Vanguard Long Term Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and Municipal Bond 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 Municipal Bond Fund are associated (or correlated) with Vanguard Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Long Term has no effect on the direction of Municipal Bond i.e., Municipal Bond and Vanguard Long-term go up and down completely randomly.
Pair Corralation between Municipal Bond and Vanguard Long-term
Assuming the 90 days horizon Municipal Bond is expected to generate 1.23 times less return on investment than Vanguard Long-term. But when comparing it to its historical volatility, Municipal Bond Fund is 1.29 times less risky than Vanguard Long-term. It trades about 0.08 of its potential returns per unit of risk. Vanguard Long Term Tax Exempt is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,006 in Vanguard Long Term Tax Exempt on September 4, 2024 and sell it today you would earn a total of 100.00 from holding Vanguard Long Term Tax Exempt or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Fund vs. Vanguard Long Term Tax Exempt
Performance |
| Timeline |
| Municipal Bond |
| Vanguard Long Term |
Municipal Bond and Vanguard Long-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Vanguard Long-term
The main advantage of trading using opposite Municipal Bond and Vanguard Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond position performs unexpectedly, Vanguard Long-term 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 Long-term will offset losses from the drop in Vanguard Long-term's long position.| Municipal Bond vs. Harbor Diversified International | Municipal Bond vs. Legg Mason Bw | Municipal Bond vs. Jhancock Diversified Macro | Municipal Bond vs. Blackrock Sm 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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