Correlation Between Vanguard Short and Vanguard High

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

By analyzing existing cross correlation between Vanguard Short Term Investment Grade and Vanguard High Yield Porate, you can compare the effects of market volatilities on Vanguard Short and Vanguard High 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 Short with a short position of Vanguard High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and Vanguard High.

Diversification Opportunities for Vanguard Short and Vanguard High

0.75

Correlation Coefficient

Vanguard Short  Vanguard High

Poor diversification

The 3 months correlation between Vanguard and Vanguard is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Investment and Vanguard High Yield Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield and Vanguard Short 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 Short Term Investment Grade are associated (or correlated) with Vanguard High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of Vanguard Short i.e., Vanguard Short and Vanguard High go up and down completely randomly.

Pair Corralation between Vanguard Short and Vanguard High

Assuming the 90 days horizon Vanguard Short Term Investment Grade is expected to under-perform the Vanguard High. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Short Term Investment Grade is 1.0 times less risky than Vanguard High. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Vanguard High Yield Porate is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  543.00  in Vanguard High Yield Porate on September 16, 2024 and sell it today you would earn a total of  4.00  from holding Vanguard High Yield Porate or generate 0.74% return on investment over 90 days.

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

Vanguard Short Term Investment  vs.  Vanguard High Yield Porate

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard High Yield

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard High Yield Porate are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Vanguard High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Short and Vanguard High

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

The idea behind Vanguard Short Term Investment Grade and Vanguard High Yield Porate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.