Correlation Between Vanguard Intermediate and Vanguard Long

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

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

Diversification Opportunities for Vanguard Intermediate and Vanguard Long

0.97

Correlation Coefficient

Vanguard Intermediate  Vanguard Long

Almost no diversification

The 3 months correlation between Vanguard and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Cor and Vanguard Long Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Long Term and Vanguard Intermediate 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 Intermediate Term Corporate are associated (or correlated) with Vanguard Long. 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 Vanguard Intermediate i.e., Vanguard Intermediate and Vanguard Long go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and Vanguard Long

Given the investment horizon of 90 days Vanguard Intermediate Term Corporate is expected to generate 0.44 times more return on investment than Vanguard Long. However, Vanguard Intermediate Term Corporate is 2.26 times less risky than Vanguard Long. It trades about 0.0 of its potential returns per unit of risk. Vanguard Long Term Bond is currently generating about -0.03 per unit of risk. If you would invest  8,183  in Vanguard Intermediate Term Corporate on August 30, 2024 and sell it today you would lose (2.00) from holding Vanguard Intermediate Term Corporate or give up 0.02% of portfolio value over 90 days.

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

Vanguard Intermediate Term Cor  vs.  Vanguard Long Term Bond

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.

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Long Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Vanguard Long is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Vanguard Intermediate and Vanguard Long

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

The idea behind Vanguard Intermediate Term Corporate and Vanguard Long Term 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .