Correlation Between Vanguard Long and WisdomTree Yield

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

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

Diversification Opportunities for Vanguard Long and WisdomTree Yield

0.88

Correlation Coefficient

Vanguard Long  WisdomTree Yield

Very poor diversification

The 3 months correlation between Vanguard and WisdomTree is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Bond and WisdomTree Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Yield Enhanced and Vanguard Long 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 Long Term Bond are associated (or correlated) with WisdomTree Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Yield Enhanced has no effect on the direction of Vanguard Long i.e., Vanguard Long and WisdomTree Yield go up and down completely randomly.

Pair Corralation between Vanguard Long and WisdomTree Yield

Considering the 90-day investment horizon Vanguard Long Term Bond is expected to generate 5.56 times more return on investment than WisdomTree Yield. However, Vanguard Long is 5.56 times more volatile than WisdomTree Yield Enhanced. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Yield Enhanced is currently generating about 0.21 per unit of risk. If you would invest  7,002  in Vanguard Long Term Bond on September 17, 2024 and sell it today you would earn a total of  36.00  from holding Vanguard Long Term Bond or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Vanguard Long Term Bond  vs.  WisdomTree Yield Enhanced

Vanguard Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Long Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

WisdomTree Yield Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Yield Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WisdomTree Yield is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Long and WisdomTree Yield

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

The idea behind Vanguard Long Term Bond and WisdomTree Yield Enhanced 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.