Correlation Between Vanguard Intermediate-ter and Maryland Tax

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

By analyzing existing cross correlation between Vanguard Intermediate Term Investment Grade and Maryland Tax Free Bond, you can compare the effects of market volatilities on Vanguard Intermediate-ter and Maryland Tax 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 Intermediate-ter with a short position of Maryland Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Intermediate-ter and Maryland Tax.

Diversification Opportunities for Vanguard Intermediate-ter and Maryland Tax

0.72

Correlation Coefficient

Vanguard Intermediate-ter  Maryland Tax

Poor diversification

The 3 months correlation between Vanguard and Maryland is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Intermediate Term Inv and Maryland Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maryland Tax Free and Vanguard Intermediate-ter 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 Intermediate Term Investment Grade are associated (or correlated) with Maryland Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maryland Tax Free has no effect on the direction of Vanguard Intermediate-ter i.e., Vanguard Intermediate-ter and Maryland Tax go up and down completely randomly.

Pair Corralation between Vanguard Intermediate-ter and Maryland Tax

Assuming the 90 days horizon Vanguard Intermediate-ter is expected to generate 1.59 times less return on investment than Maryland Tax. In addition to that, Vanguard Intermediate-ter is 1.56 times more volatile than Maryland Tax Free Bond. It trades about 0.04 of its total potential returns per unit of risk. Maryland Tax Free Bond is currently generating about 0.09 per unit of volatility. If you would invest  898.00  in Maryland Tax Free Bond on October 24, 2024 and sell it today you would earn a total of  107.00  from holding Maryland Tax Free Bond or generate 11.92% return on investment over 90 days.

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

Vanguard Intermediate Term Inv  vs.  Maryland Tax Free Bond

Vanguard Intermediate-ter

Risk-Adjusted Performance

0 of 100

Very Weak

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

Maryland Tax Free

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Maryland Tax Free Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Maryland Tax 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 Intermediate-ter and Maryland Tax

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

The idea behind Vanguard Intermediate Term Investment Grade and Maryland Tax Free Bond 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.