Correlation Between Vanguard Total and ETRACS Quarterly

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

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

Diversification Opportunities for Vanguard Total and ETRACS Quarterly

0.22

Correlation Coefficient

Vanguard Total  ETRACS Quarterly

Modest diversification

The 3 months correlation between Vanguard and ETRACS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay and Vanguard Total 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 Total Bond are associated (or correlated) with ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of Vanguard Total i.e., Vanguard Total and ETRACS Quarterly go up and down completely randomly.

Pair Corralation between Vanguard Total and ETRACS Quarterly

Considering the 90-day investment horizon Vanguard Total is expected to generate 1.61 times less return on investment than ETRACS Quarterly. But when comparing it to its historical volatility, Vanguard Total Bond is 5.75 times less risky than ETRACS Quarterly. It trades about 0.14 of its potential returns per unit of risk. ETRACS Quarterly Pay is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,151  in ETRACS Quarterly Pay on December 28, 2024 and sell it today you would earn a total of  97.30  from holding ETRACS Quarterly Pay or generate 3.09% return on investment over 90 days.

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

Vanguard Total Bond  vs.  ETRACS Quarterly Pay

Vanguard Total Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ETRACS Quarterly Pay

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, ETRACS Quarterly is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and ETRACS Quarterly

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

The idea behind Vanguard Total Bond and ETRACS Quarterly Pay 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.