Correlation Between Vanguard Intermediate and Baird Quality

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

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

Diversification Opportunities for Vanguard Intermediate and Baird Quality

0.97

Correlation Coefficient

Vanguard Intermediate  Baird Quality

Almost no diversification

The 3 months correlation between Vanguard and Baird is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Tax and Baird Quality Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Quality Interm 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 Tax Exempt are associated (or correlated) with Baird Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Quality Interm has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Baird Quality go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and Baird Quality

Assuming the 90 days horizon Vanguard Intermediate Term Tax Exempt is expected to generate 1.18 times more return on investment than Baird Quality. However, Vanguard Intermediate is 1.18 times more volatile than Baird Quality Intermediate. It trades about 0.04 of its potential returns per unit of risk. Baird Quality Intermediate is currently generating about 0.01 per unit of risk. If you would invest  1,364  in Vanguard Intermediate Term Tax Exempt on August 31, 2024 and sell it today you would earn a total of  7.00  from holding Vanguard Intermediate Term Tax Exempt or generate 0.51% return on investment over 90 days.

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

Vanguard Intermediate Term Tax  vs.  Baird Quality Intermediate

Vanguard Intermediate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Tax Exempt are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Baird Quality Interm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Baird Quality Intermediate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Baird Quality 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 Intermediate and Baird Quality

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

The idea behind Vanguard Intermediate Term Tax Exempt and Baird Quality Intermediate 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.