Correlation Between Vanguard Total and Vanguard Intermediate

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Intermediate 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 Total and Vanguard Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Total Bond and Vanguard Intermediate Term Corporate, you can compare the effects of market volatilities on Vanguard Total and Vanguard Intermediate 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 Total with a short position of Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Intermediate.

Diversification Opportunities for Vanguard Total and Vanguard Intermediate

0.98

Correlation Coefficient

Vanguard Total  Vanguard Intermediate

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Vanguard Intermediate Term Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate and Vanguard Total 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 Total Bond are associated (or correlated) with Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Intermediate go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Intermediate

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the Vanguard Intermediate. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 1.02 times less risky than Vanguard Intermediate. The etf trades about -0.03 of its potential returns per unit of risk. The Vanguard Intermediate Term Corporate is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,206  in Vanguard Intermediate Term Corporate on September 1, 2024 and sell it today you would earn a total of  11.00  from holding Vanguard Intermediate Term Corporate or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard Total Bond  vs.  Vanguard Intermediate Term Cor

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Total and Vanguard Intermediate

The main advantage of trading using opposite Vanguard Total and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total position performs unexpectedly, Vanguard Intermediate 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 Intermediate will offset losses from the drop in Vanguard Intermediate's long position.

The idea behind Vanguard Total Bond and Vanguard Intermediate Term Corporate 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.