Correlation Between Vanguard ESG and AB Corporate

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

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

Diversification Opportunities for Vanguard ESG and AB Corporate

0.99

Correlation Coefficient

Vanguard ESG  AB Corporate

No risk reduction

The 3 months correlation between Vanguard and EYEG is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Corporate and AB Corporate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Corporate Bond and Vanguard ESG 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 ESG Corporate are associated (or correlated) with AB Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Corporate Bond has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and AB Corporate go up and down completely randomly.

Pair Corralation between Vanguard ESG and AB Corporate

Given the investment horizon of 90 days Vanguard ESG is expected to generate 1.25 times less return on investment than AB Corporate. But when comparing it to its historical volatility, Vanguard ESG Corporate is 1.06 times less risky than AB Corporate. It trades about 0.06 of its potential returns per unit of risk. AB Corporate Bond is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,406  in AB Corporate Bond on September 12, 2024 and sell it today you would earn a total of  208.00  from holding AB Corporate Bond or generate 6.11% return on investment over 90 days.

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

Vanguard ESG Corporate  vs.  AB Corporate Bond

Vanguard ESG Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard ESG Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AB Corporate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AB Corporate Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, AB Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard ESG and AB Corporate

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

The idea behind Vanguard ESG Corporate and AB Corporate Bond 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.