Correlation Between Vanguard Short-term and Holbrook Income

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

Diversification Opportunities for Vanguard Short-term and Holbrook Income

-0.3

Correlation Coefficient

Vanguard Short-term  Holbrook Income

Very good diversification

The 3 months correlation between Vanguard and Holbrook is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Bond and Holbrook Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holbrook Income and Vanguard Short-term 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 Holbrook Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holbrook Income has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Holbrook Income go up and down completely randomly.

Pair Corralation between Vanguard Short-term and Holbrook Income

Assuming the 90 days horizon Vanguard Short Term Bond is expected to under-perform the Holbrook Income. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Short Term Bond is 1.74 times less risky than Holbrook Income. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Holbrook Income Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Holbrook Income Fund on October 8, 2024 and sell it today you would earn a total of  6.00  from holding Holbrook Income Fund or generate 0.62% return on investment over 90 days.

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

Vanguard Short Term Bond  vs.  Holbrook Income Fund

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Short Term Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Holbrook Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holbrook Income Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Holbrook Income 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 Short-term and Holbrook Income

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

The idea behind Vanguard Short Term Bond and Holbrook Income Fund 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.