Correlation Between Vanguard Total and WisdomTree Yield

Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Bond and WisdomTree Yield Enhanced, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of WisdomTree Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and WisdomTree Yield.

Diversification Opportunities for Vanguard Total and WisdomTree Yield

0.91

Correlation Coefficient

Vanguard Total  WisdomTree Yield

Almost no diversification

The 3 months correlation between Vanguard and WisdomTree is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total 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 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 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 Total i.e., Vanguard Total and WisdomTree Yield go up and down completely randomly.

Pair Corralation between Vanguard Total and WisdomTree Yield

Considering the 90-day investment horizon Vanguard Total Bond is expected to under-perform the WisdomTree Yield. In addition to that, Vanguard Total is 2.36 times more volatile than WisdomTree Yield Enhanced. It trades about -0.15 of its total potential returns per unit of risk. WisdomTree Yield Enhanced is currently generating about -0.04 per unit of volatility. If you would invest  4,762  in WisdomTree Yield Enhanced on September 17, 2024 and sell it today you would lose (18.00) from holding WisdomTree Yield Enhanced or give up 0.38% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  WisdomTree Yield Enhanced

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

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 Total and WisdomTree Yield

The main advantage of trading using opposite Vanguard Total and WisdomTree Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.