Correlation Between Vanguard Total and Vanguard Institutional

Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Vanguard Institutional 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 Institutional 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 Institutional Total, you can compare the effects of market volatilities on Vanguard Total and Vanguard Institutional 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 Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Vanguard Institutional.

Diversification Opportunities for Vanguard Total and Vanguard Institutional

-0.64

Correlation Coefficient

Vanguard Total  Vanguard Institutional

Excellent diversification

The 3 months correlation between Vanguard and Vanguard is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and Vanguard Institutional Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Institutional 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 Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Institutional has no effect on the direction of Vanguard Total i.e., Vanguard Total and Vanguard Institutional go up and down completely randomly.

Pair Corralation between Vanguard Total and Vanguard Institutional

Assuming the 90 days horizon Vanguard Total Bond is expected to under-perform the Vanguard Institutional. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Total Bond is 2.27 times less risky than Vanguard Institutional. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Vanguard Institutional Total is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  9,508  in Vanguard Institutional Total on September 12, 2024 and sell it today you would earn a total of  906.00  from holding Vanguard Institutional Total or generate 9.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Vanguard Total Bond  vs.  Vanguard Institutional Total

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 fund investors. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Institutional

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Institutional Total are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Institutional may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Total and Vanguard Institutional

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

The idea behind Vanguard Total Bond and Vanguard Institutional Total 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.