Correlation Between Vanguard ESG and Intermediate Municipal

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

Diversification Opportunities for Vanguard ESG and Intermediate Municipal

0.67

Correlation Coefficient

Vanguard ESG  Intermediate Municipal

Poor diversification

The 3 months correlation between Vanguard and Intermediate is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard ESG Corporate and Intermediate Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Municipal 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 Intermediate Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Municipal has no effect on the direction of Vanguard ESG i.e., Vanguard ESG and Intermediate Municipal go up and down completely randomly.

Pair Corralation between Vanguard ESG and Intermediate Municipal

Given the investment horizon of 90 days Vanguard ESG Corporate is expected to under-perform the Intermediate Municipal. In addition to that, Vanguard ESG is 1.53 times more volatile than Intermediate Municipal Income. It trades about -0.03 of its total potential returns per unit of risk. Intermediate Municipal Income is currently generating about 0.05 per unit of volatility. If you would invest  5,048  in Intermediate Municipal Income on September 12, 2024 and sell it today you would earn a total of  33.00  from holding Intermediate Municipal Income or generate 0.65% return on investment over 90 days.

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

Vanguard ESG Corporate  vs.  Intermediate Municipal Income

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.

Intermediate Municipal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Municipal Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Intermediate Municipal is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard ESG and Intermediate Municipal

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

The idea behind Vanguard ESG Corporate and Intermediate Municipal Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.