Correlation Between Vanguard Short and Guidepath Absolute

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

By analyzing existing cross correlation between Vanguard Short Term Investment Grade and Guidepath Absolute Return, you can compare the effects of market volatilities on Vanguard Short and Guidepath Absolute 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 Guidepath Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and Guidepath Absolute.

Diversification Opportunities for Vanguard Short and Guidepath Absolute

0.84

Correlation Coefficient

Vanguard Short  Guidepath Absolute

Very poor diversification

The 3 months correlation between Vanguard and Guidepath is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Investment and Guidepath Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guidepath Absolute Return 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 Investment Grade are associated (or correlated) with Guidepath Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guidepath Absolute Return has no effect on the direction of Vanguard Short i.e., Vanguard Short and Guidepath Absolute go up and down completely randomly.

Pair Corralation between Vanguard Short and Guidepath Absolute

Assuming the 90 days horizon Vanguard Short is expected to generate 1.57 times less return on investment than Guidepath Absolute. But when comparing it to its historical volatility, Vanguard Short Term Investment Grade is 1.0 times less risky than Guidepath Absolute. It trades about 0.05 of its potential returns per unit of risk. Guidepath Absolute Return is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  975.00  in Guidepath Absolute Return on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Guidepath Absolute Return or generate 0.62% return on investment over 90 days.

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

Vanguard Short Term Investment  vs.  Guidepath Absolute Return

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Guidepath Absolute Return

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind Vanguard Short Term Investment Grade and Guidepath Absolute Return 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.