Correlation Between Vanguard Short and AB Active

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

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

Diversification Opportunities for Vanguard Short and AB Active

0.6

Correlation Coefficient

Vanguard Short  AB Active

Poor diversification

The 3 months correlation between Vanguard and SDFI is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Bond and AB Active ETFs, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Active ETFs, and Vanguard Short 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 Short Term Bond are associated (or correlated) with AB Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Active ETFs, has no effect on the direction of Vanguard Short i.e., Vanguard Short and AB Active go up and down completely randomly.

Pair Corralation between Vanguard Short and AB Active

Considering the 90-day investment horizon Vanguard Short Term Bond is expected to generate 0.98 times more return on investment than AB Active. However, Vanguard Short Term Bond is 1.02 times less risky than AB Active. It trades about 0.24 of its potential returns per unit of risk. AB Active ETFs, is currently generating about 0.2 per unit of risk. If you would invest  7,678  in Vanguard Short Term Bond on December 28, 2024 and sell it today you would earn a total of  146.00  from holding Vanguard Short Term Bond or generate 1.9% return on investment over 90 days.

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

Vanguard Short Term Bond  vs.  AB Active ETFs,

Vanguard Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Bond are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Short is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

AB Active ETFs,

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AB Active ETFs, are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, AB Active is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Short and AB Active

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

The idea behind Vanguard Short Term Bond and AB Active ETFs, 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.