Correlation Between Vanguard Intermediate and Nuveen Enhanced

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

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

Diversification Opportunities for Vanguard Intermediate and Nuveen Enhanced

0.96

Correlation Coefficient

Vanguard Intermediate  Nuveen Enhanced

Almost no diversification

The 3 months correlation between Vanguard and Nuveen is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Bon and Nuveen Enhanced Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Enhanced Yield 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 Bond are associated (or correlated) with Nuveen Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Enhanced Yield has no effect on the direction of Vanguard Intermediate i.e., Vanguard Intermediate and Nuveen Enhanced go up and down completely randomly.

Pair Corralation between Vanguard Intermediate and Nuveen Enhanced

Considering the 90-day investment horizon Vanguard Intermediate Term Bond is expected to generate 2.59 times more return on investment than Nuveen Enhanced. However, Vanguard Intermediate is 2.59 times more volatile than Nuveen Enhanced Yield. It trades about 0.14 of its potential returns per unit of risk. Nuveen Enhanced Yield is currently generating about 0.29 per unit of risk. If you would invest  7,419  in Vanguard Intermediate Term Bond on December 26, 2024 and sell it today you would earn a total of  195.00  from holding Vanguard Intermediate Term Bond or generate 2.63% 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 Bon  vs.  Nuveen Enhanced Yield

Vanguard Intermediate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Intermediate Term Bond are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Vanguard Intermediate is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nuveen Enhanced Yield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Enhanced Yield are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nuveen Enhanced 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 Nuveen Enhanced

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

The idea behind Vanguard Intermediate Term Bond and Nuveen Enhanced Yield 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.