Correlation Between Vanguard Short and Vanguard Target

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

By analyzing existing cross correlation between Vanguard Short Term Federal and Vanguard Target Retirement, you can compare the effects of market volatilities on Vanguard Short and Vanguard Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and Vanguard Target.

Diversification Opportunities for Vanguard Short and Vanguard Target

-0.33

Correlation Coefficient

Vanguard Short  Vanguard Target

Very good diversification

The 3 months correlation between Vanguard and Vanguard is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Federal and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Federal are associated (or correlated) with Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of Vanguard Short i.e., Vanguard Short and Vanguard Target go up and down completely randomly.

Pair Corralation between Vanguard Short and Vanguard Target

Assuming the 90 days horizon Vanguard Short Term Federal is expected to under-perform the Vanguard Target. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Short Term Federal is 4.15 times less risky than Vanguard Target. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Vanguard Target Retirement is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,173  in Vanguard Target Retirement on September 13, 2024 and sell it today you would earn a total of  254.00  from holding Vanguard Target Retirement or generate 4.91% return on investment over 90 days.

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

Vanguard Short Term Federal  vs.  Vanguard Target Retirement

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Short Term Federal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental 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 Target Reti

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Target 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 Target

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

The idea behind Vanguard Short Term Federal and Vanguard Target Retirement 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 Transaction History module to view history of all your transactions and understand their impact on performance.