Correlation Between Vanguard Energy and Core Fixed

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

By analyzing existing cross correlation between Vanguard Energy Index and Core Fixed Income, you can compare the effects of market volatilities on Vanguard Energy and Core Fixed 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 Energy with a short position of Core Fixed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Core Fixed.

Diversification Opportunities for Vanguard Energy and Core Fixed

0.36

Correlation Coefficient

Vanguard Energy  Core Fixed

Weak diversification

The 3 months correlation between Vanguard and Core is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Index and Core Fixed Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Fixed Income and Vanguard Energy 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 Energy Index are associated (or correlated) with Core Fixed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Fixed Income has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Core Fixed go up and down completely randomly.

Pair Corralation between Vanguard Energy and Core Fixed

Assuming the 90 days horizon Vanguard Energy Index is expected to under-perform the Core Fixed. In addition to that, Vanguard Energy is 4.29 times more volatile than Core Fixed Income. It trades about -0.13 of its total potential returns per unit of risk. Core Fixed Income is currently generating about -0.47 per unit of volatility. If you would invest  684.00  in Core Fixed Income on October 9, 2024 and sell it today you would lose (17.00) from holding Core Fixed Income or give up 2.49% of portfolio value over 90 days.

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

Vanguard Energy Index  vs.  Core Fixed Income

Vanguard Energy Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Core Fixed Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Core Fixed 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 Energy and Core Fixed

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

The idea behind Vanguard Energy Index and Core Fixed Income 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.