Correlation Between Vanguard Intermediate and Vanguard Tax

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

By analyzing existing cross correlation between Vanguard Intermediate Term Treasury and Vanguard Tax Managed Capital, you can compare the effects of market volatilities on Vanguard Intermediate and Vanguard Tax 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 Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate and Vanguard Tax.

Diversification Opportunities for Vanguard Intermediate and Vanguard Tax

-0.73

Correlation Coefficient

Vanguard Intermediate  Vanguard Tax

Pay attention - limited upside

The 3 months correlation between Vanguard and Vanguard is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tre and Vanguard Tax Managed Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Tax Managed 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 Treasury are associated (or correlated) with Vanguard Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Tax Managed has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Vanguard Tax go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and Vanguard Tax

Assuming the 90 days horizon Vanguard Intermediate Term Treasury is expected to under-perform the Vanguard Tax. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Intermediate Term Treasury is 2.5 times less risky than Vanguard Tax. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Vanguard Tax Managed Capital is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  14,235  in Vanguard Tax Managed Capital on September 12, 2024 and sell it today you would earn a total of  1,260  from holding Vanguard Tax Managed Capital or generate 8.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Intermediate Term Tre  vs.  Vanguard Tax Managed Capital

Vanguard Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Intermediate Term Treasury has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Tax Managed

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Tax Managed Capital are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Tax may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Intermediate and Vanguard Tax

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

The idea behind Vanguard Intermediate Term Treasury and Vanguard Tax Managed Capital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.